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  <TITLE>NOx Budget Proposal</TITLE>

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<P>

<B>This proposal has been filed with the Office of Administrative Law. The

Office of Administrative Law will edit this proposal before publishing it

in the New Jersey Register. &nbsp;Please refer to the September 15, 1997

New Jersey Register for the official text of the proposal.</B>

<P ALIGN=Center>

<A HREF="#List">List of supplementary documents</A> 

  <HR>

<B><FONT SIZE=+2>ENVIRONMENTAL PROTECTION</FONT></B>

<B><FONT SIZE=+1></FONT></B>

<P ALIGN=Center>

<B><FONT SIZE=+1>POLICY AND PLANNING/AIR QUALITY MANAGEMENT</FONT></B>

<FONT SIZE=+1></FONT>

<P ALIGN=Center>

<FONT SIZE=+1>NO<SUB>x</SUB> Budget Program</FONT>

<P ALIGN=Left>

Proposed New Rules: N.J.A.C. 7:27-31

<P>

Proposed Amendments:

<P>

N.J.A.C. 7:27A-3.10

<P>

Authorized by: Robert

<P>

C. Shinn, Jr., Commissioner, Department of Environmental Protection

<P>

Authority: N.J.S.A. 13:1B-3 and 26:2C-1 et seq.

<P>

DEP Docket Number: 21-97-08/636

<P>

Proposal Number: PRN

<P>

A public hearing concerning this proposal will be held on:

<P>

Friday, October 17, 1997, at 10:00 a.m.

<P>

New Jersey Department of Environmental Protection

<P>

401 East State Street

<P>

Hearing Room - First Floor, East Wing

<P>

Trenton, New Jersey

<P>

Submit written comments by Friday, October 24, 1997 to:

<P>

Ann Zeloof, Esq. &nbsp;

<P>

Attn: Docket # 21-97-08/636

<P>

Department of Environmental Protection

<P>

Office of Legal Affairs

<P>

P.O. Box 401

<P>

Trenton, New Jersey 08625-0402

<P ALIGN=Center>

<A HREF="notice.wp5"><BIG>Notice: Public Comment Period Extended through

November 24, 1997</BIG></A>

<P>

Written comments may also be submitted at the public hearing. As a courtesy

to the Department, it is requested (but not required) that anyone submitting

written comments also include a diskette containing an electronic version

of the written comments with the submission.

<P>

Copies of this proposal can be downloaded electronically from the Department's

Electronic Bulletin Board. The compressed file, NOXBUDP.ZIP, contains

WordPerfect&reg; 5.1 documents and is located in file area #35 (Air: Props,

Adopts, &amp; Notices). The data line number for the Bulletin Board is (609)

292-2006 (Data bit: 8; Parity: N; Stop bit: 1). Copies of this proposal may

also be requested by calling the Department's Air Quality Rule Development

Section at (609)777-1345.

<P>

These proposed new rules will become operative 60 days after adoption by

the Commissioner (see N.J.S.A. 26:2C-8).

<P>

Summary

<P>

The Department hereby proposes new rules at N.J.A.C. 7:27-31 entitled "NOx

Budget Program." These new rules would prescribe participation of New Jersey's

large combustion sources in a regional cap and trade program designed to

significantly reduce emissions of oxides of nitrogen (NOx).

<P>

I. Background

<P>

A. Ozone Transport Commission Memorandum of Understanding

<P>

The Federal Clean Air Act , 42 U.S.C. &#167;&#167;7401 et seq., as amended

by the Clean Air Act Amendments of 1990 (P.L. 101-549, November 15, 1990)

prescribed the establishment of the Ozone Transport Commission (OTC) which

consists representatives from of 12 northeastern states and the District

of Columbia. On September 27, 1994, a Memorandum of Understanding (MOU) Among

the States of the OTC on the Development of a Regional Strategy Concerning

the Control of Stationary Source Nitrogen Oxide Emissions was signed by

representatives of the following member jurisdictions of the Ozone Transport

Commission: Connecticut, Delaware, the District of Columbia, Maine, Maryland,

New Hampshire, New Jersey, New York, Pennsylvania Rhode Island, and Vermont.

Commissioner Robert C. Shinn signed the agreement for New Jersey. The MOU

was subsequently signed also by a representative of Massachusetts in February,

1996.

<P>

The MOU included a commitment by each jurisdiction to establish regulations

for the control of emissions of oxides of nitrogen (NOx) from boilers and

other indirect heat exchangers having a maximum gross heat input rate of

at least 250 million British Thermal Units per hour. It established the

principles upon which a regionwide NOx emissions budget was to be developed,

which would provide an overall limit or "cap" on emissions from sources subject

to the program. It also included an agreement to develop a regionwide trading

mechanism in order to provide a more flexible and cost-effective means to

comply with the program.

<P>

B. OTC Model Rule

<P>

A task force was established by the Northeast States for Coordinated Air

Use Management (NESCAUM) and the Mid-Atlantic Regional Air Management Association

(MARAMA) to create a model rule for the participating jurisdictions to use

as common basis for the rules each would promulgate to establish the NOx

Budget Program within its jurisdiction. The participating jurisdictions agreed

that a common foundation for most aspects of the program, not including the

method for allocating allowances within a jurisdiction, would be necessary

if regionally consistent implementation of the NOx Budget Program was to

be achieved. All OTC jurisdictions, as well as representatives of the United

States Environmental Protection Agency (USEPA), participated in the task

force. An advisory group comprised of stakeholder representatives met

periodically with the task force. Further input was obtained at public meetings

open to all interested persons. The task force issued a final model rule

(dated May 1, 1996).

<P>

The regional NOx Budget Program, envisioned in the model rule, would require

that all budget sources in the OTR, collectively, to reduce their emissions

of NO x such that, beginning in 1999 and each year thereafter, the total

emissions from all budget sources in the OTR during the summer ozone season

would not exceed the finite amount of emissions authorized by the allowances

available for use during that period. The model rule included a trading

mechanism, modeled in large part on the allowance trading mechanism included

in USEPA's Acid Rain Program. The model rule has been used as a basis for

the rules proposed herein.

<P>

C. Guidance Documents

<P>

To continue the effort to achieve regionally consistent implementation of

the NOx Budget Program, a budget implementation workgroup was established

as a cooperative effort between the OTC, member jurisdictions, and USEPA's

Acid Rain Division. Under the auspices of this workgroup, implementation

guidance documents are being developed. On several occasions the workgroup

held open public meetings, in order to create the opportunity for public

participation in the development of the guidance documents.

<P>

On January 28, 1997, the "Guidance for Implementation of Emission Monitoring

Requirements for the NOx Budget Program" was officially issued. On July 3,

1997, the "Electronic Data Reporting: Acid Rain Program/NOxBudget Program

-- Version 2.0" and the "NOx Budget Program Monitoring Certification and

Reporting Instructions"were officially issued. These guidance documents,

and any subsequent revisions thereto, are incorporated by reference in the

proposed rules. Copies of these guidance documents may be downloaded from

USEPA's Acid Rain Program home page at &lt;http://www.epa.gov/acidrain&gt;;

are included in the compressed file which contains this proposal on the NJDEP

BBS (as mentioned above); and may also be requested by contacting the

Department's Air Quality Rule Development Section at (609)777-1345.

<P>

Guidance regarding the allowance tracking system is additionally forthcoming.

<P>

D. Other States Efforts

<P>

The Massachusetts Department of Environmental Protection proposed its State

rules for the NOx Budget Program in October, 1996 and has adopted the rules

with an effective date of June 3, 1997. The New Hampshire Department of

Environmental Services proposed its rules on January 28, 1997. The Pennsylvania

Department of Environmental Protection published its proposed rules on April

12,. 1997. Environmental agencies of other participating jurisdictions are

each proceeding toward the proposal, within the next several months, the

rules which would implement the NOx Budget Program in their jurisdiction.

<P>

E. SIP Obligation

<P>

Pursuant to the Federal Clean Air Act, the USEPA has established a National

Ambient Air Quality Standard (NAAQS) for ozone, 42 U.S.C.

&#167;&#167;7409(a)(1). The Act required any state in which the ambient air

quality failed to achieve the NAAQS to submit a State Implementation Plan

(SIP) to USEPA, 42 U.S.C. &#167;&#167;7410. The SIP provides for the state

to establish enforceable emission limitations and other control measures

that would enable the state to achieve the standard.

<P>

New Jersey is subject to this requirement because it has not attained the

NAAQS for ozone. EPA has designated 18 of the State's 21 counties as being

in "severe" nonattainment, based on ozone levels in those areas more than

50 percent above the NAAQS. In the SIP revision submitted to the USEPA on

December 31, 1996, New Jersey made a legally-binding commitment to promulgate

the NOx Budget Program. This proposal is a step taken by the Department toward

the fulfillment of that commitment.

<P>

II. Description of proposal

<P>

The provisions of the proposed NOx Budget Program rules set forth herein

are based on those of the NESCAUM/MARAMA model rule. The Department recognizes

that both the general framework and key provisions of all participating

jurisdictions' rules must be consistent, in order to facilitate interstate

trading of allowances.

<P>

In three cases, the Department has proposed options in the rule, and requests

comment on these options. After taking into consideration the comment received,

the Department intends to adopt one of the options. In the first case, the

issue is which protocol should be used as a basis for quantifying electricity

savings. This issue appears in the N.J.A.C. 7:27-31.2 in the definition of

"energy efficiency project" and at N.J.A.C. 7:27-31.8(c)1ii(1). In the second

case, the issue is how to calculate the allowances that should be deducted

for a decline in productivity of an opt-in source. This issue appears at

N.J.A.C. 7:27-31.17(g)3. In the third case, the issue is how to provide

allowances to meet incentive claims. This issue appears at N.J.A.C.

7:27-31.7(c)3ii.

<P>

The following paragraphs briefly describe the provisions of the proposed

rules.

<P>

N.J.A.C. 7:27-31.1 Purpose and Scope

<P>

This section states the purpose of the proposed rules, which is to establish

a NOx Budget Program. It explains that, beginning in 1999, the program would

limit emissions from stationary sources of NOx during the summer ozone season

(May 1 through September 30). The program would include requirements for

monitoring, recordkeeping, and reporting of NOx emissions and for certification

of compliance, and the program would include a trading mechanism.

<P>

N.J.A.C. 7:27-31.2 Definitions

<P>

This section sets forth definitions of terms used in the rules and explanations

of acronyms used in the rules. Numerous definitions have been modeled, with

modifications for clarity and consistency with New Jersey rule style, on

the definitions of these terms in the model rule; such terms include: "account,"

"account number," "acquiring account," " allocate," "allowance," " allowance

deduction," "allowance transfer," " allowance transfer deadline," "alternative

monitoring system," " authorized account representative (AAR)," "banked

allowance," " banking," " baseline," " boiler," " budget source," " Clean

Air Act (CAA)," "compliance account," "continuous emissions monitoring system

(CEMS)," "control period," "current year," "early reduction allowance," "electric

generating unit," "excess emissions," "fossil fuel," "fossil fuel fired,"

"general account," "heat input," "indirect heat exchanger," "maximum rated

heat input capacity," "NOx allowance tracking system (NATS)," "NOx Emissions

tracking system (NETS) ," "non-part 75 budget source," "opt-in," "OTC MOU,"

"OTR," " owner or operator," "quantifiable," "real," "recorded," "repowering,"

"submitted," and "surplus."

<P>

The definition of the term "repowering" references the definition of "qualifying

repowering technology" at 40 C.F.R. 72. This definition, published on July

1, 1996, at 40 C.F.R. 72.2 is as follows:

<P>

"Qualifying repowering technology means: (1) Replacement of an existing

coal-fired boiler with one of the following clean coal technologies: Atmospheric

or pressurized fluidized bed combustion, integrated gasification combined

cycle, magnetohydrodynamics, direct and indirect coal-fired turbines, integrated

gasification fuel cells, or as determined by the Administrator, in consultation

with the Secretary of Energy, a derivative of one or more of these technologies,

and any other technology capable of controlling multiple combustion emissions

simultaneously with improved boiler or generation efficiency and with

significantly greater waste reduction relative to the performance of technology

in widespread commercial use as of the date of enactment of the Clean Air

Act Amendments of 1990; or (2) Any oil- or gas-fired unit that has been awarded

clean coal technology demonstration funding as of January 1, 1991, by the

Department of Energy."

<P>

Certain of the proposed definitions are modeled on definitions of these terms

by USEPA. For example, the definitions for the terms "net electric output"

and "net useful heat output" are derived from revisions to the Standards

of Performance for Nitrogen Oxide Emissions From New Fossil-Fuel Fired Steam

Generating Units proposed on July 9, 1997 at 62 FR 36948. The definition

of "net useful heat output" and "net useful work" is consistent with the

definition of "net useful steam output" at the Federal Energy Regulatory

Commission regulations at 18 C.F.R. 292.205.

<P>

Certain of the proposed definitions are modeled on the definitions for these

terms used in other subchapters of the New Jersey Air Pollution Control Code

(N.J.A.C. 7:27).

<P>

N.J.A.C. 7:27-31.3 Applicability and general provisions

<P>

This section provides an overview of the requirements of the rules. It defines

the persons to whom the rules apply. This includes the owner or operator

of any budget source. It also includes any other person, as well, who is

a holder of an account in the NOx Allowance Tracking System (NATS).

<P>

This section establishes the emissions budget for each year, commencing in

1999, introduces the allowance allocation system, and explains that all

allowances are held in an account in the NATS. It establishes that holders

of accounts in the NATS must designate an authorized account representative.

It establishes that an owner or operator of a budget source must monitor

and report its emissions, and ensure each year that there are sufficient

allowances in the source's compliance account to cover its control period

emissions.

<P>

This section also explains that during the end-of-season reconciliation process

the NATS Administrator will deduct from each budget source's compliance account

allowances equal to its control period emissions.

<P>

N.J.A.C. 7:27-31.4 Opt-in provisions

<P>

This section provides that an owner or operator of a stationary source which

is not encompassed by the MOU (that is, neither a fossil fuel-fired boiler

or indirect heat exchanger with a maximum rated heat input capacity of at

least 250 million BTUs per hour nor an electric generating unit with a rated

output of at least 15 MW) may, with the approval of the Department, voluntarily

choose to opt the source into the NOx Budget Program.

<P>

An application procedure, including a listing of required documentation,

is set forth. If the Department approves the opt-in source, it will determine

the number of allowances that would be added to the New Jersey emission budget

each year in order to accommodate the source. A procedure for Departmental

publication in the New Jersey Register concerning approval and public comment

regarding opt-in sources is also provided. Upon approval of the opt-in

application, the source shall be considered a budget source, subject to the

requirements of the NOx Budget Program. Finally, this section addresses

situations in which opt-in sources are re-powered or replaced.

<P>

N.J.A.C. 7:27-31.5 Interface with the emission offset program

<P>

This section clarifies that a new or modified source must meet the applicable

requirements of the emission offset rules at N.J.A.C. 7:27-18 as well as

the requirements of the new rules proposed herein. It also provides that

if emission offsets created by a budget source are secured for use by a

non-budget source, then an equivalent number of allowances shall be retired.

<P>

N.J.A.C. 7:27-31.6 Interface with the open market emissions trading program

<P>

This section provides that NOx emission reductions made by a budget source

may not be used as the basis for a DER credit under N.J.A.C. 7:27-30, and

that except as is provided, DER credits may not be converted to allowances

and used to satisfy the requirements of the proposed rules. Moreover, allowances

may not be converted to DER credits and used pursuant to the Department's

Open market Trading Program, except as specifically provided with reference

to consumers of electricity.

<P>

N.J.A.C. 7:27-31.7 Annual allowance allocation

<P>

This section addresses the Department's annual allocation of allowances,

beginning in 1999 through 2002, which will be the control period, and for

the year 2003 and each year thereafter. The allocation of allowances prior

to 1999 is also addressed, as are allowances for opt-in sources.

<P>

The proposed rule also provides for establishment of the Growth Reserve.

The Growth Reserve is designed to hold aside a pool of allowances, so that

they are available for distribution after the control period to certain budget

sources in order to accommodate an increase in fuel use.

<P>

N.J.A.C. 7:27-31.8 Claims for incentive reserve allowances

<P>

This section creates an incentive for the saving or generation of electricity

through the implementation of certain environmentally beneficial techniques.

The Department is proposing to distribute allowances from an Incentive Reserve

each year to persons who have demonstrated that they have saved or generated

electricity by employing such techniques. Two methods of allowance distribution

are proposed. One will be selected for adoption.

<P>

Persons eligible to submit claims for incentive reserve allowances include

specified New Jersey electric consumers, and the owner or operator of a source

that is not a budget source, which commenced operating on or after 1992,

and which generates electricity through one of the environmentally beneficial

techniques set forth in the proposed rules. Additionally, a person who is

eligible to receive an incentive allocation may, pursuant to the Open Market

Emissions Trading Program rules at N.J.A.C. 7:27-30, elect to receive DERs

credit instead.

<P>

N.J.A.C. 7:27-31.9 Permits

<P>

This section provides that the owner or operator of a budget source must

ensure that the operating permit issued pursuant to N.J.A.C. 7:27-22 which

applies to a budget source shall incorporate all applicable requirements

of the proposed new rules. The number of allowances in a budget source's

compliance account must at least equal, in emissions value, the NOx emissions

of the source. Additionally, an authorized account representative must be

designated for the budget source. The authorized account representative will

have the authority to submit transfer requests to the NATS Administrator.

<P>

Even if a budget source's allowances in a compliance account are sufficient

to account for the NOx emissions during a control period, the emissions shall

not occur if they would contravene an appropriate NOx RACT standard established

at N.J.A.C. 7:27-19, a permit limit, or any other emission limit that applies

to the budget source.

<P>

Finally, this provision addresses cases in which an opt-in source is located

at a facility which is subject to the permitting requirements of N.J.A.C.

7:27-22, and requires that the owner or operator of a source shall incorporate

the opt-in approval of the source into the operating permit.

<P>

N.J.A.C. 7:27-31.10 Allowance use, transfer and retirement

<P>

This section enumerates situations in which an allowance may be used in a

given year to meet a budget source's NOx Budget Program compliance obligations

pursuant to N.J.A.C. 7:27-31.3(i). Additionally, an allowance may be used

to meet the obligations of a budget source located in New Jersey, although

the allowance was initially located in another jurisdiction.

<P>

The procedure by which an authorized account representative may authorize

the transfer of one or more allowances is also described in this provision,

as is the processing and recording of transfer requests by the NATS

Administrator. While the proposed rule allows the interstate and

interjurisductional transfer of allowances, the transfer of a New Jersey

allowance to the compliance account of a budget source located in another

jurisdiction is prohibited until the other jurisdiction has adopted rules

which allow the interstate trading of allowances and is implementing a NOx

Budget Program, consistent with the agreements in the Ozone Transport Commission

Memorandum of Understanding discussed above.

<P>

N.J.A.C. 7:27-31.11 Allowance banking

<P>

This section provides that if an allowance held in a general account or a

compliance account which is not used to satisfy compliance requirements of

the proposed rules at N.J.A.C. 7:27-31.3(i), not otherwise deducted from

the account pursuant to proposed N.J.A.C. 7:27-31.17 or 31.19, and is not

permanently retired pursuant to N.J.A.C. 7:27-31.10, that allowance may be

held in the account until the next or subsequent control periods. The retention

of one or more allowances in an account from one year to a future year is

referred to as "banking." The proposed rule sets forth the duties of the

NATS administrator in identifying and tracking banked allowances.

<P>

N.J.A.C. 7:27-31.12 Early reductions

<P>

This section provides that the owner or operator of a budget source may claim

an early reduction credit based upon certain reductions in the emissions

from a budget source during 1997 and 1998. The Department may subsequently

convert such reductions into allowances. The proposed rule additionally sets

forth the procedure to be followed by the owner or operator of a budget source

who wishes to claim early reductions pursuant to the proposed rule. The

information required by the Department in evaluating a claim for reductions

is also set forth in this section.

<P>

N.J.A.C. 7:27-31.13 NOx allowance tracking system (NATS)

<P>

This section provides that the NOx Allowance Tracking System (NATS) is the

official electronic database serving the NOx Budget Program. The NATS will

track all allowance transfer, use, and retirement. The NATS shall keep track

of each allowance held in each account and shall provide information for

specific time periods. The duties of the NATS administrator will include

assigning a unique identification number to each allowance tracked by the

NATS, and establishing and maintaining accounts in the NATS. In addition

to these accounts, the NATS Administrator shall establish an account in the

NATS upon request of persons listed at N.J.A.C. 7:27-31.13(d). The information

required to be submitted by persons requesting establishment of a NATS account

is also set forth in this section, as is the procedure employed for designating

an authorized account representative.

<P>

N.J.A.C. 7:27-31.14 Emission monitoring

<P>

This section sets forth NOx emissions monitoring requirements for owners

or operators of each budget source as specified by this section and by the

"Guidance for Implementation of Emission Monitoring Requirements for the

NOx Budget Program." The submission and content of monitoring plans is addressed,

as is the installation and operation of monitoring systems which have been

approved by the Department.

<P>

N.J.A.C. 7:27-31.15 Recordkeeping

<P>

This section requires the owner or operator of any budget source to maintain

for each budget source, for a period of five years, a file of all measurements,

data, calculations, reports, and other information required by the proposed

new rules.

<P>

N.J.A.C. 7:27-31.16 Reporting

<P>

This section addresses the Department's allocation of allowances pursuant

to N.J.A.C. 7:27-31.7, Annual allowance allocation, and reflects that in

order for the Department to calculate allocations, owners or operators of

NOx budget sources shall submit specified information relating to the operation

of the source during May 1 through September 30 of the years 1996, 1997,

and 1998. Additionally, starting within 30 days after the end of the third

calendar quarter of 1998, and within 30 days of the end of each quarter

thereafter for data monitored using CEMS, and within 30 days of the end of

each second and third calendar quarter thereafter for data measured or estimated

using non-CEMS based methodologies, the authorized account representative

shall submit the information specified in the provision.

<P>

After a budget source is permanently shut down, the authorized account

representative may obtain an exemption from emissions monitoring, recordkeeping,

and reporting requirements pertaining to that source from the Department

in accordance with the procedures specified in the proposed new rules.

<P>

N.J.A.C. 7:25-31.17 End-of-season reconciliation

<P>

This section provides that in after each control period, the NATS Administrator

shall conduct an end-of-season reconciliation, during which allowances, equal

in emissions value to the source's emissions during the control period, are

deducted from each budget source's compliance account(s). Criteria for the

determination of compliance by budget sources in the reconciliation process

are set forth in this provision.

<P>

N.J.A.C. 7:27-31.18 Compliance certification

<P>

This section provides that for each control period, the authorized account

representative for a budget source is required to submit to the Department

an annual compliance certification to the Department in the state. Information

which is required as part of this submission is also ennumerated.

<P>

N.J.A.C. 7:27-31.19 Excess emissions deduction

<P>

This section provides that if, through the reconciliation process, the NATS

Administrator determines that there are not enough allowances in a budget

source's compliance account to properly account for the emissions of that

sources during the control period, the NATS Administrator shall automatically

deduct three allowances for each ton of NOx emitted for which no allowances

were held as of the allowance transfer deadline.

<P>

N.J.A.C. 7:27-31.20 Program audit

<P>

This section provides that the Department shall conduct an audit of the NOx

Budget Program in the year 2002 and every three years thereafter in order

to ensure that the program is providing expected performance regarding emissions

monitoring and allowance use. As an alternative to conducting an audit, the

Department may request a third party audit of the program.

<P>

N.J.A.C. 7:27A-3.10 Civil and administrative penalties

<P>

Proposed amendments at subsection (m) state that the violation of the proposed

N.J.A.C 7:27-31 and the civil and administrative penalty amounts for each

violation are set forth in a Civil Administrative Penalty Schedule.

<P>

  <HR>

<P>

Social Impact

<P>

The Department expects the NOx Budget Program to have a positive social impact.

There are a number of reasons for this.

<P>

The program is designed to help the State make significant progress toward

the attainment of the National Ambient Air Quality Standard for ozone, therefore

to help make the State a more healthful place to live, work, and recreate.

The lowered exposure to ozone in the ambient air will be experienced not

only by New Jersey residents but also by residents in downwind areas of

neighboring states. In this way the program will help provide a better quality

of life, not only for New Jersey, but for the region.

<P>

The program would delineate the compliance obligations for the affected companies

over a long time frame. This should provide a degree of certainty to those

companies that will help them in their long-range planning. They will be

able to choose whether to move incrementally to comply with the new lower

emissions limits over a period of years, or whether to make any changes that

are needed in their operation in a single undertaking.

<P>

The interstate trading provisions of the program allow regulated entities

flexibility in how companies achieve the emission reductions needed to protect

public health and environment. This will enable the managers of each company

to a develop a compliance strategy which is, for that company, the most

cost-effective approach to compliance and the approach most compatible with

how their company operates. This should enable any disruption in the company's

operations, in order to comply with these requirements, to be minimized,

which will benefit the company's employees. This should also enable the costs

of compliance to be minimized, and the company should be able to pass on

these cost savings on to its customers and/or shareholders.

<P>

  <HR>

<P>

Economic Impact

<P>

The Department expects the NOx Budget Program to have a substantial economic

impact.

<P>

The cost of air pollution to the general public is very significant. The

American Lung Association (ALA) has estimated the cost of health problems

attributed to air pollution, including the loss of worker productivity, to

be in the range of $4.43 to $93.49 billion dollars per year, nationally.

(American Lung Association et al. v. EPA, Case No. 91 Civ. No. 4114, Second

Circuit Federal U.S. District Court, October 22, 1991.) Reducing air pollutant

emissions significantly, as would be done pursuant to this proposed rule,

is expected to reduce these costs to the general public.

<P>

However, reducing NOx emissions to comply with the NOx Budget Program will

impose some increased costs on affected companies. Estimates of these costs

are often given in terms of the total levelized annual costs, which taken

into account the initial capital investment, the annual operating costs,

and the cost of borrowing money. Estimates of the average total levelized

annual cost of reducing a ton of ozone-season NOx have ranged widely. Some

persons have suggested that the average levelized annual cost per ton of

ozone-season NOx reduced will be as low as $500 per ton; others have argued

that it will be as high as $2,000 or $2,500 per ton. The Department believes

that the probable range will be $1,000 to $1,500 per ton of ozone-season

NOx reduced. Given this cost per ton projection, the Department expects that

the total annual cost of achieving the limits proposed herein for 1999 will

fall in the range of $3.9 million to $5.9 million, and that the additional

cost of achieving the limits proposed herein for the year 2003 will fall

in the range of $9.1 million to $13.7 million.

<P>

In including in this proposal provisions for interstate trading of allowances,

the Department`s goal is to provide a means for companies to reduce their

cost of compliance, while ensuring that the environmental goal of the program

(that is, not allowing overall emissions to exceed the emissions budget)

is met. A September 1995 study, entitled "Estimated Effects of Alternative

NOx Cap and Trading Schemes in the Northeast Ozone Transport Region," prepared

by the consulting group ICF Kaiser Resources for the OTC and USEPA has shown

that trading will reduce companies' cost of complying with the emission budget

by about a third.

<P>

  <HR>

<P>

Environmental Impact

<P>

The Department expects the NOx Budget Program to have a substantial positive

environmental impact.

<P>

The underlying purpose of the proposed new rules is to reduce the formation

of ground-level ozone. In the presence of sunlight, volatile organic compounds

(VOCs) and oxides of nitrogen (NOx) and other compounds in the ambient air

react to form ozone. Ozone is a know respiratory irritant. Short-term effects

on healthy exercising adults and children from exposure to elevated ozone

concentrations include coughing, painful breathing and loss of certain lung

functions. The connection between respiratory disease and high levels of

ozone have been reported by the University of Medicine and Dentistry (UMDNJ).

After studying data from nine central New Jersey hospitals, UMDNJ researchers

found that the incidence of asthma attacks rose from seven to ten percent

when elevated levels of ozone were reported by the Department. (Cody, R.P.,

Weisel, C.P., Birnbaum, G., and Lioy, P.J., "The Effect of Ozone Associated

with Summertime Photochemical Smog on the Frequency of Asthma Visits to Hospital

Emergency Departments," Environmental Research, 1992.) These effects are

exacerbated in sensitive populations, particularly the elderly, those with

preexisting respiratory diseases and children who play outdoors. Long-term

effects are also of concern, because much of New Jersey's population has

been exposed to unhealthful levels of ozone throughout their lifetime. Although

chronic effects have not been conclusively determined, repeated exposure

to ozone over a lifetime causes biochemical and structural changes in the

lung and may be a causal factor in the development of chronic respiratory

diseases.

<P>

Increased ozone levels also cause damage to foliage. One of the earliest

and most obvious manifestations of ozone impact on the environment is this

impact on sensitive plants. Subsequent effects include reduced plant growth

and decreased crop yield. The oxidizing properties of ozone lead to accelerated

degradation of various man-made materials as well, such as rubber, plastics,

dyes and paints.

<P>

The limitations on the emission of NOx proposed herein is expected to contribute

significantly to lowering the formation of ozone in the ambient air and to

progress toward attainment of the National Ambient Air Quality Standard for

ozone in New Jersey and throughout the Ozone Transport Region. The resulting

reduction in ambient ozone concentrations should diminish the occurrence

of the adverse health effects and the damage to the environment described

above.

<P>

In 1990 the emissions from budget sources totaled over 46,500 tons of NOx

during the ozone season (May 1 through September 30). By 1995, following

the Department's 1993 promulgation of N.J.A.C. 7:27-19, Control and Prohibition

of Air Pollution from Oxides of Nitrogen, emissions of NOx during the ozone

season were reduced to about 21,200 tons per year. Under the rules proposed

herein, these emissions would be reduced further to about 17,300 tons per

ozone season in 1999 through 2002, and to about 8,200 tons per ozone season

in 2003 and each year thereafter. Overall this close to an 80 percent reduction

between 1990 and 2003 in NOx emissions during the ozone season. To achieve

this overall reduction, some of the higher-emitting sources are expected

to reduce their emissions by 90 percent or more.

<P>

The concern has been raised by some as to whether the interstate trading

proposed herein might undermine the environmental benefits of the program.

Specifically, their concern is whether, by allowing the free transfer of

allowances in accordance with market demand, the result might be excessively

high emissions in some localities. These rules include a safeguard that ensures

that no facility currently operating in New Jersey will be able, under the

NOx Budget Program, to disregard its permit limits or other restrictions.

This safeguard is included at N.J.A.C. 7:27-31.3(l) which states that allowances

"cannot be used to authorize the exceedance of the limitations of a permit

or of another applicable rule or regulation."

<P>

Also, this concern has been addressed in the study prepared for the OTC and

USEPA, by ICF Resources, entitled "Estimated Effects of Alternative NOx Cap

and Trading Schemes in the Northeast Ozone Transport Region," September 1995.

The study evaluated the effect of the geographical shift in emissions under

three scenarios: one in which there was no trading; one in which there was

full, unrestricted throughout the OTR; and one where trading was restricted

to within the three subregional zones established in the OTC MOU. The ICF

study showed that in the year 2005, there is no discernible difference in

regional NOx emissions when comparing full, unrestricted trading to an intrazone

trading option. In addition it was shown that the full, unrestricted trading

option compliance costs were slightly lower than the intrazone trading option

and much lower than the "no trading" option.

<P>

Given the findings of the ICF study which projected a minimal overall effect

of interstate trading on reasonable further progress toward attainment of

the NAAQS for ozone, USEPA has informed states that the regional control

approach, including unrestricted interstate trading, is generally consistent

with states meeting their obligations to make progress toward and attain

and maintain the NAAQS for ozone. However, USEPA has provided guidance that

the NOx Budget Program should include commitments for tracking changes in

the geographical distribution of NOx emissions and, if localized problems

do emerge, to modify the program to remedy any such occurrence. The Department

has conformed with this guidance in the proposed rules by including provisions

for tracking all actual emissions in the National Emissions Tracking System

(NETS); by providing at N.J.A.C. 7:27-31.20(a) for periodic program audits;

and by including at N.J.A.C. 7:27-31.20(c) a commitment to propose modifications

to the program, if the Department finds that it is necessary or appropriate,

based on its consideration of the audit's findings.

<P>

  <HR>

<P>

Federal Standards Statement

<P>

In accordance with Governor Whitman's Executive Order No. 27 (1994), the

Department has reviewed the standards and requirements of the proposed new

rules, and compared them with the standards and requirements imposed by the

CAA and 40 C.F.R. Part 70. The Department has found that the proposed new

rules do not exceed the requirements imposed by Federal law.

<P>

  <HR>

<P>

Jobs Impact

<P>

The Economic Impact above discusses costs that the Department expects the

regulated community to realize from the implementation of these new rules.

Each member of the regulated community will choose its own approach or

combination of approaches to defray these costs. Examples of such approaches

include reducing (or limiting the growth of) any of the following: other

business expenditures; dividends and other distributions; and compensation

to management and other employees. In addition, compliance costs could be

passed on in the form of increased prices for goods and services sold by

regulated companies. A more drastic approach would be for a regulated entity

to limit or reduce the number of its employees. Because each member of the

regulated community may defray its compliance costs in a different way, it

is not possible to estimate accurately the extent, if any, to which these

rules will affect employment. However, in developing these rules the Department

has worked to minimize the cost of compliance (and thereby minimize the possible

adverse effect on employment) as much as possible while still protecting

public health and safety and the environment.

<P>

  <HR>

<P>

Regulatory Flexibility Analysis

<P>

As required by the New Jersey Regulatory Flexibility Act, N.J.S.A. 52:14B-16

et seq., the Department has evaluated the reporting, recordkeeping and other

compliance requirements that the proposed new rules would impose upon small

businesses. The Regulatory Flexibility Act defines "small business" as "any

business which is a resident in this State, independently owned and operated

and not dominant in its field, and which employs fewer than 100 full-time

employees." Based upon this definition, some of the facilities that would

be subject to the NOx Budget Program may be owned or operated by small

businesses.

<P>

In order to comply with the rules, any small business that owns and operates

a budget source must 1) prepare and submit monitoring plans, 2) install new

emissions monitoring devices and/or modify existing emissions monitoring

devices, 3) designate an authorized account representative, 4) submit quarterly

emissions reports to the NETS, 5) submit reports to the Department containing

emissions and operations data of the budget source during the years 1996,

1997, and 1998, 6) submit annual compliance reports to the Department, 7)

ensure that an adequate number of allowances are held by the allowance transfer

deadline, and 8) maintain records of all data, calculations, reports, and

other information as required by the rule. In complying with these rules,

it is likely that some small businesses will need to hire environmental

consultants to assist in the preparation of monitoring plans, and in the

installation, modification and maintenance of any emissions monitoring devices.

The cost of such monitoring plan preparation and other activities relating

to the operation of emissions monitoring devices will vary greatly depending

on the emissions monitoring methodology the owner and operator chooses.

<P>

The Department has taken measures to minimize the adverse impact of the NOx

Budget Program upon small businesses. Most small businesses with sources

subject to the program will have sources with emissions that are less than

0.15 pounds of NOx per MMBtu's of fuel consumed. The allocation system proposed

herein simplifies compliance for such sources by ensuring that they are allocated

sufficient allowances to meet their compliance obligations. Therefore, the

Department believes that of the NOx Budget Program will minimize any adverse

impact on small business to the extent allowed by Federal and State law,

without compromising the Department's obligation to protect public health,

safety and welfare.

<P>

  <HR>

<P>

<B>Full text</B> of the proposal follows (additions indicated in boldface

<B>thus</B>):

<P>

<B><FONT SIZE=+1>SUBCHAPTER 31. NOx BUDGET PROPOSAL</FONT></B>

<P>

<B>7:27-31.1 Purpose and scope</B>

<P>

<B>This subchapter establishes a NOx Budget Program in New Jersey which,

beginning in 1999, limits emissions from stationary sources of NOx. It sets

forth requirements for the monitoring, recordkeeping, and reporting of NOx

emissions and for certification of compliance with this program. It makes

available a trading mechanism, which allows intrastate trading as well as

interstate trading. In order to support the trading mechanism, this subchapter

establishes rules and procedures for the allocation of the tradeable units

(that is, allowances); the transfer, use, and retirement of the allowances;

and the tracking of the allowances.</B>

<P>

  <HR>

<P>

<B>7:27-31.2 Definitions</B>

<P>

<B>The following words, terms, and abbreviations used in this subchapter

have the following meanings, unless the context clearly indicates

otherwise:</B>

<P>

<B>"AAR" means authorized account representative.</B>

<P>

<B>"Account" means the place in the NOx Allowance Tracking System where

allowances are held for a specific person or purpose. Such a place may be

a compliance account, a general account, or a retirement account.</B>

<P>

<B>"Account number" means the identification number given by the NATS

Administrator to an account in which allowances are held in the NOx Allowance

Tracking System pursuant to N.J.A.C. 7:27-31.13, NOx Allowance Tracking

System.</B>

<P>

<B>"Acquiring account" means the account in an allowance transfer to which

allowances are conveyed.</B>

<P>

<B>"Allocate" or "allocation" means:</B>

<P>

<B>1. In respect to New Jersey, the assignment of allowances pursuant to

N.J.A.C. 7:27-31.7, Annual Allowance Allocation; or in respect to another

jurisdiction, the assignment of allowances pursuant to that jurisdiction's

comparable rules; and</B>

<P>

<B>2. The recording of the assigned allowances by the NATS Administrator

in the appropriate NOx Allowance Tracking System compliance account or general

account.</B>

<P>

<B>"Allowance" means a tradeable unit which represents the limited authorization

to emit one ton of NOx during a control period.</B>

<P>

<B>"Allowance deduction" means the withdrawal by the NATS Administrator of

one or more allowances from a NOx Allowance Tracking System general account

or compliance account and the recording of such allowances in a retirement

account.</B>

<P>

<B>"Allowance transfer" means the withdrawal by the NATS Administrator of

one or more allowances from a NOx Allowance Tracking System general account

or compliance account and the recording of such allowances in a different

general account or compliance account.</B>

<P>

<B>"Allowance transfer deadline" means midnight of December 31 of a given

year, and is the deadline by which an allowance transfer request may be submitted

to the NATS Administrator to effect an allowance transfer for the purpose

of meeting the requirement of N.J.A.C. 7:27-31.3(i) for the year's control

period.</B>

<P>

<B>"Alternative monitoring system" means a monitoring system other than a

CEMS, or component of such a system, that is designed to determine mass emissions

per time period, air contaminant concentrations, or volumetric flow of a

given source or group of sources, as provided for in N.J.A.C. 7:27-31.14,

Emissions monitoring.</B>

<P>

<B>"Authorized account representative" means the responsible individual

designated in writing by the person who holds an account. This individual

(or his or her alternate) is the sole person who has the authority, on behalf

of the account, to submit allowance transfer requests to the NATS Administrator,

and to as certify and submit reports to the NATS and the NETS.</B>

<P>

<B>"Banked allowance" means an allowance in a general account or a compliance

account which has been neither used to reconcile emissions in the year it

was originally allocated nor retired, and which is therefore carried forward

in the account into the next year or into successive future years. The NATS

Administrator shall flag such an allowance as "banked."</B>

<P>

<B>"Banking" means the retention in a general account or a compliance account

of one or more allowances that were allocated for use in the current or in

a previous control period, but have been neither used nor retired. Such

allowances may be used or retired in a future control period.</B>

<P>

<B>"Base budget" or "base emission budget" means the emissions budget for

each control period that has been developed by applying the emission limits,

jointly agreed to by the jurisdictions who are signatories of the OTC MOU,

to the baseline sources' baseline emissions. This term when used in respect

to:</B>

<P>

<B>1. A specific OTR jurisdiction, is the emission budget so established

for that jurisdiction; and</B>

<P>

<B>2. The OTR as a whole, is the sum of the emission budgets so established

for all jurisdictions in the region.</B>

<P>

<B>"Baseline" means, when used in reference to the emissions or productivity

of a source, one of the following:</B>

<P>

<B>1. For an opt-in source, the average emissions or average productivity

of that source during the two consecutive May 1 through September 30 periods

on which the increase in the New Jersey emissions budget made to accommodate

the source was based, pursuant to N.J.A.C. 7:27-31.4; or</B>

<P>

<B>2. For a baseline source, the emissions or productivity attributed to

that source in the 1990 baseline NOx emission inventory.</B>

<P>

<B>"Baseline NOx emission inventory" means the emissions inventory which

developed jointly by all jurisdictions in the OTR and which sets forth, for

all baseline sources, the NOx emissions of these sources for the period May

1 and September 30, 1990. This inventory is the emission baseline from which

emission reductions are calculated for purposes of determining the effectiveness

of the NOx Budget Program in limiting NOx emissions.</B>

<P>

<B>"Baseline source" means a source which is one of the following and which

operated during the May 1 through September 30 period in 1990:</B>

<P>

<B>1. A fossil fuel fired boiler or indirect heat exchanger with a maximum

rated heat input capacity of at least 250 MMBtu per hour; or</B>

<P>

<B>2. An electric generating unit with a rated output of at least 15 MW.</B>

<P>

<B>"Boiler" means an indirect heat exchanger which combusts fossil fuel to

produce steam, or to heat water or any other heat transfer medium.</B>

<P>

<B>"British Thermal Unit" means the quantity of heat required to raise the

temperature of one avoirdupois pound of water from 63 to 64 degrees

Fahrenheit.</B>

<P>

<B>"Btu" means British Thermal Unit.</B>

<P>

<B>"Budget source" means any of the following sources located in a the OTR:</B>

<P>

<B>1. A fossil fuel fired indirect heat exchanger with a maximum rated heat

input capacity of at least 250 MMBtu per hour;</B>

<P>

<B>2. An electric generating unit with a rated output of at least 15 MW;

or</B>

<P>

<B>3. Any source that has been approved as an opt-in source.</B>

<P>

<B>"CEMS" means continuous emission monitoring system.</B>

<P>

<B>"Clean Air Act" means the Federal Clean Air Act as amended in 1990 (42

U.S.C. &#167;&#167;7401 through 7626).</B>

<P>

<B>"Compliance account" means an account in the NATS where allowances are

held in order to be available for use in complying with end-of-season

reconciliation requirements pursuant to N.J.A.C. 7:27-31.3(i). The number

of allowances in the account will be increased if allowances are allocated

to the account or if allowances are transferred into the account from another

account. The number of allowances in the account will be decreased if allowances

in the account are transferred from the account into another account or if

the NATS Administrator makes an allowance deduction for compliance purposes.

Each compliance account is associated with a specific budget source.</B>

<P>

<B>"Continuous emissions monitoring system" means a system of equipment that

samples, analyzes, and determines, on a continuous basis, for a given source

or group of sources, mass emissions of one or more air contaminants per time

period, and that records the results in order to provide a permanent record

of such data. The following are component parts of a continuous emissions

monitoring system required under this subchapter:</B>

<P>

<B>1. Nitrogen oxides pollutant concentration monitor;</B>

<P>

<B>2. Diluent gas monitor (oxygen or carbon dioxide);</B>

<P>

<B>3. Flow monitoring systems (flue gas flow or fuel flow); and</B>

<P>

<B>4. A data acquisition and handling system.</B>

<P>

<B>"Control period" means, for the year 1999 and thereafter, the period beginning

May 1 of each year and ending on September 30 of the same year, inclusive.</B>

<P>

<B>"Current year" means the present calendar year.</B>

<P>

<B>"Department" means the New Jersey Department of Environmental

Protection.</B>

<P>

<B>"DER credit" means a discrete emission reduction credit pursuant to N.J.A.C.

7:27-30.</B>

<P>

<B>"Early reduction allowance" means an allowance based on NOx emission

reductions that meet the criteria specified in N.J.A.C. 7:27-31.12, Early

reductions, and that occurred during the period May 1 through September 30,

1997, or the period May 1 through September 30, 1998; or that occurred during

both such periods.</B>

<P>

<B>"Electric generating unit" means any fossil fuel fired combustion unit

of 15 MW capacity or greater which provides electricity for sale or use.

This term does not include a waste-to-electricity unit.</B>

<P>

<B>"Emissions budget" means a limit or "cap" on the number of tons of NOx

emissions which are allowed to be emitted. This limit is effected by constraining

the amount of allowances allocated to a number which does not exceed the

number of tons set for the emissions budget.</B>

<P>

<B>"Energy efficiency project" means a project which:</B>

<P>

<B>1. Is implemented by an electric consumer;</B>

<P>

<B>2. Reduces the consumer's consumption of electricity;</B>

<P>

<B>(AGENCY NOTE: Two alternatives are set forth below for paragraph 3. The

Department will adopt one of these two alternatives. The Department requests

comments as to which of these two alternatives is preferable.)</B>

<P>

<B>ALTERNATIVE 1</B>

<P>

<B>3. Belongs to a category included in the guidance document "Measurement

Protocol for Commercial, Industrial and Residential Facilities," issued by

New Jersey's Board of Regulatory Commissioners on April 28, 1993;</B>

<P>

<B>ALTERNATIVE 2</B>

<P>

<B>3. Belongs to a category included in the guidance document "International

Performance Measurement and Verification Protocol (IPMVP) for Accrediting

Emission Reductions from Energy Efficiency" issued by the United States

Department of Energy in March 1996;</B>

<P>

<B>4. The electricity savings of the project is quantified in accordance

with this measurement protocol; and</B>

<P>

<B>5. Does not entail the direct use of combustion equipment.</B>

<P>

<B>"Excess emissions" means emissions of NOx reported by a budget source

during a control period which, as of the allowance transfer deadline following

the control period, are greater than the emissions value of the allowances

in the budget source's compliance account.</B>

<P>

<B>"Fossil fuel" means natural gas, petroleum, coal or any form of solid,

liquid or gaseous fuel derived wholly, or in part, from such material.</B>

<P>

<B>"Fossil fuel fired" means fueled by at least 51 percent fossil fuel on

an annual heat input basis.</B>

<P>

<B>"General account" means an account in the NATS where allowances are held

for a specific person. The number of allowances in the account will be increased

if allowances are allocated to the account or if allowances are transferred

into the account from another account. The number of allowances in the account

will be decreased if allowances in the account are transferred from the account

into another account. There are two types of general accounts:</B>

<P>

<B>1. Accounts associated with a person who requested the creation of the

account pursuant to N.J.A.C. 7:27-31.13; and</B>

<P>

<B>2. Accounts utilized by the Department in the allocation process described

at N.J.A.C. 7:27-31.7.</B>

<P>

<B>"Hazardous air pollutant" or "HAP" means an air contaminant listed in

or pursuant to 42 U.S.C. &#167;7412(b).</B>

<P>

<B>"Heat input" means the heat content of the fuel combusted in a source.

This term does not include the heat derived from preheated combustion air,

recirculated flue gas, or exhaust from other sources.</B>

<P>

<B>"Indirect heat exchanger" means stationary source combustion equipment

in which the flame and/or products of combustion are separated from any contact

with the principal material in the process by metallic or refractory walls.

Such equipment includes, but is not limited to, steam boilers, vaporizers,

heat exchangers, column reboilers, fractioning column feed preheaters, reactor

feed preheaters, fuel-fired reactors such as steam hydrocarbon reformer heaters

and pyrolysis heaters.</B>

<P>

<B>"Industrial boiler" means a boiler that meets the following criteria:</B>

<P>

<B>1. No steam produced by the boiler is used to produce electricity that

is sold or otherwise supplied to any utility power distribution system; and</B>

<P>

<B>2. No steam produced by the boiler is sold or otherwise supplied to a

steam distribution system for the purpose of providing steam that would produce

electrical energy for sale.</B>

<P>

<B>"Maximum rated heat input capacity" means the maximum amount of fuel that

is able to be combusted per unit of time on a steady state basis in a given

combustion device as determined by the physical design and characteristics

of the combustion device. This amount (usually expressed in MMBtu per hour)

is the product of the gross caloric value of the fuel (usually expressed

in Btu per mass of fuel) and the fuel feed rate (usually expressed in mass

of fuel per hour).</B>

<P>

<B>"MMBtu" means one million British Thermal Units.</B>

<P>

<B>"MW" means megawatt.</B>

<P>

<B>"MW-hr" means megawatt-hour.</B>

<P>

<B>"NATS" means NOx Allowance Tracking System.</B>

<P>

<B>"NATS Administrator" means the agency which is authorized, by New Jersey

and the other jurisdictions implementing the NOx Budget Program, to administer

and operate the NATS.</B>

<P>

<B>"Net electric output" means, for units generating only electricity, the

net busbar power leaving the plant; that is, the total electrical output

generated minus the energy requirements for auxiliaries and emission

controls.</B>

<P>

<B>"Net useful heat output" means the net useful work performed by the steam

or heat generated, not including both the energy requirements for auxiliaries

and emission controls and the net electric output performed by the steam

generated.</B>

<P>

<B>"Net useful work" means, for cogeneration units, the net electrical output

(that is, the net busbar power leaving the plant) plus one half the useful

thermal output (that is, steam delivered to an industrial process).</B>

<P>

<B>"NETS" means NOx Emission Tracking System.</B>

<P>

<B>"NETS Administrator" means the agency which is authorized, by New Jersey

and the other jurisdictions implementing the NOx Budget Program, to administer

and operate the NETS.</B>

<P>

<B>"New budget source" means, in respect to provisions of N.J.A.C. 7:27-31.7,

Annual allowance allocation, a budget source that, as of May 1 of the current

year, meets all of the following three criteria:</B>

<P>

<B>1. Is not an opt-in source;</B>

<P>

<B>2. Has been permitted to operate; and</B>

<P>

<B>3. Has not yet operated for two full May 1 through September 30 periods.</B>

<P>

<B>"New Jersey budget" or "New Jersey emission budget" means the base emission

budget, plus the amount added for any sources that have been opted in to

the NOx Budget Program pursuant to N.J.A.C. 7:27-31.4.</B>

<P>

<B>"New Jersey holder" means, with respect to an account in the NATS, any

of the following:</B>

<P>

<B>1. An owner or operator of a budget source located in New Jersey, for

which there is a compliance account in the NATS; or</B>

<P>

<B>2. A person who has established a general account or a retirement account

in the NATS, and who is located in New Jersey or conducts activities which

are subject to this subchapter.</B>

<P>

<B>"NOx" means oxides of nitrogen.</B>

<P>

<B>"NOx Allowance Tracking System" means the system used to track allowances

as they are allocated, transferred, used and retired.</B>

<P>

<B>"NOx Emissions Tracking System" means the system used to track NOx emissions

from budget sources.</B>

<P>

<B>"Non-Part 75 budget source" means any budget source not subject to the

requirements for emissions monitoring adopted pursuant to &#167;412 of the

Clean Air Act Amendments of 1990 and codified at 40 C.F.R. Part 75.</B>

<P>

<B>"Opt in" means voluntarily to choose to have a given source, which otherwise

is not mandated to be a budget source, participate in the NOx Budget Program

and comply with the terms and conditions of this subchapter.</B>

<P>

<B>"Opt-in source" means a stationary source which has been opted in the

NOx Budget Program. If the source is located in New Jersey, this source shall

have been approved pursuant to N.J.A.C. 7:27-31.4, Opt in provisions. If

the source is located in another jurisdiction in the OTR, this source shall

been approved pursuant to the equivalent requirements established in that

jurisdiction.</B>

<P>

<B>"OTC" means Ozone Transport Commission.</B>

<P>

<B>"OTC MOU" means the Memorandum of Understanding signed by representatives

of States that are members of the OTR and the District of Columbia on September

27, 1994, or later. The signing of this document constituted a commitment

by the signatories to develop and implement the NOx Budget Program in each

of their jurisdictions.</B>

<P>

<B>"OTR" means the Ozone Transport Region, as designated by &#167;184(a)

of the Clean Air Act Amendments of 1990. This region is comprised of the

States of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire,

New Jersey, New York, Pennsylvania, Rhode Island and Vermont; the District

of Columbia; and the following counties of the State of Virginia: Arlington,

Fairfax, Loudoun, and Prince William.</B>

<P>

<B>"Ozone Transport Commission" means the organization established pursuant

to &#167;184(a) of the Clean Air Act Amendments of 1990. The members of this

commission include an air pollution control official from each of the following

jurisdictions: Connecticut, Delaware, the District of Columbia, Maine, Maryland,

Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island,

Vermont and Virginia.</B>

<P>

<B>"Owner or operator" means any person who is an owner or who operates,

controls or supervises a source and shall include, but not be limited to,

any holding company, utility system or plant manager.</B>

<P>

<B>"Oxides of nitrogen" means all oxides of nitrogen, except nitrous oxide,

as measured by test methods required under this subchapter.</B>

<P>

<B>"Properly quantified" means, in reference to emission reductions, has

been quantified on a reliable and replicable basis that is acceptable to

the Department and to the USEPA.</B>

<P>

<B>"Real" means, in reference to emission reductions, possessing the following

characteristics:</B>

<P>

<B>1. Represents a reduction in emissions which is not due to the shutdown

or curtailment of the productivity of the source;</B>

<P>

<B>2. Has been quantified retrospectively; and</B>

<P>

<B>3. Is net of any consequential increase in actual emissions due to any

resultant shifting of demand.</B>

<P>

<B>"Recorded" means, in reference to an allowance transfer or an allowance

deduction, that the records of the account from which one or more allowance

are being removed have been updated by the NATS Administrator and, in the

case of an allowance transfer, that the records of the acquiring account

have been updated to reflect the allowance increase.</B>

<P>

<B>"Repowering" means, for the purpose of generating early reduction

credit:</B>

<P>

<B>1. The installation of equipment which is Qualifying Repowering Technology

as defined by 40 C.F.R. Part 72; or</B>

<P>

<B>2. The replacement of a budget source either by a new combustion source

or by the purchase of heat or power from the owner of a new combustion source

provided that:</B>

<P>

<B>i. The replacement source (regardless of owner) is on the same property

or on a contiguous property as the budget source being replaced;</B>

<P>

<B>ii. The replacement source has a maximum useful heat output rate (including

electric power) that is equal to or greater than the maximum heat output

rate of the budget source being replaced; and</B>

<P>

<B>iii. Relative to the performance of technology in widespread commercial

use as of November 15, 1990, the replacement source incorporates technology

which better controls the emission of the air contaminants from the combustion

process, while simultaneously improving fuel efficiency.</B>

<P>

<B>"Retirement account" means an account in the NATS where allowances that

are held which have already been used or have been permanently retired and

therefore will never available for use. The number of allowances in the account

shall be increased if allowances are transferred into the account from another

account. The number of allowances in the account shall never decrease. There

are two types of retirements accounts:</B>

<P>

<B>1. Accounts into which the NATS administrator deposits allowances deducted

from compliance accounts pursuant to the end-of-season reconciliation procedures

described at N.J.A.C. 7:27-31.17; and</B>

<P>

<B>2. Accounts into which the NATS administrator deposits allowances that

are permanently retired at the request of the AAR of a general account or

a compliance account.</B>

<P>

<B>"State Implementation Plan" or "SIP" means a plan for the attainment of

any National Ambient Air Quality Standard, prepared by a state and approved

by the USEPA pursuant to Section 110 of the Clean Air Act (42 U.S.C.

&#167;&#167;1857 et seq.).</B>

<P>

<B>"Source operation" or "source" means any process, or any identifiable

part thereof, that emits or can reasonably be anticipated to emit any air

contaminant either directly or indirectly into the outdoor atmosphere. A

source operation may include one or more pieces of equipment or control

apparatus.</B>

<P>

<B>"Submitted" means, in respect to submissions to the NATS or NETS, signed

by the authorized account representative and sent to the appropriate

agency.</B>

<P>

<B>"Surplus" means, in reference to emission reductions:</B>

<P>

<B>1. Not required pursuant to any air quality emission limit or standard

in any applicable law, regulation, or order;</B>

<P>

<B>2. Not relied upon in a SIP submitted by the State at the time the reduction

was made, including in an attainment demonstration that applies to the air

quality control region in which the emission reductions occur; and</B>

<P>

<B>3. Not required pursuant to a permit, unless the permit expressly states

that the emission reductions (or a portion of such reductions) are being

made voluntarily and are not the consequence of any requirement.</B>

<P>

<B>"USEPA" means the United States Environmental Protection Agency.</B>

<P>

  <HR>

<P>

<B>7:27-31.3 Applicability and general provisions</B>

<P>

<B>(a) The provisions of this subchapter apply to the owner or operator of

any budget source located in New Jersey. This shall include the owner or

operator of any baseline source and of any source "opted-in" to the NOx Budget

Program pursuant to N.J.A.C. 7:27-31.4.</B>

<P>

<B>(b) Each jurisdiction in the OTR which is implementing the NOx Budget

Program is establishing a base emission budget for the control period in

each year, commencing with the year 1999. The base emission budget for New

Jersey is as follows:</B>

<P>

<B>1. 17,340 tons of NOx for the years 1999, 2000, 2001, and 2002; and</B>

<P>

<B>2. 13,022 tons of NOx for the year 2003 and each year thereafter.</B>

<P>

<B>(c) Beginning in 1999, the Department shall allocate each year a number

of allowances not exceeding the number of tons in the base emission budget

for that year, plus an additional number of allowances added to accommodate

opt-in sources, pursuant to N.J.A.C. 7:27-31.4. For each year the NATS

Administrator shall initially assign allowances equal to New Jersey's base

emission budget, plus the allowances for the opt-in sources, to New Jersey's

"primary" account in the NATS. This "primary" account is a general account

held by the Department from which it allocates allowances.</B>

<P>

<B>(d) All allowances shall be held in an account in the NOx Allowance Tracking

System (NATS), as described at N.J.A.C. 7:27-31.13, NOx Allowance Tracking

System. These allowances shall include only the following:</B>

<P>

<B>1. Allowances which reflect each year's base emission budget;</B>

<P>

<B>2. Allowances created to accommodate opt-in sources pursuant to N.J.A.C.

7:27-31.4; and</B>

<P>

<B>3. Allowances based on early reduction credits pursuant to N.J.A.C.

7:27-31.12.</B>

<P>

<B>(e) In the years 1999 through 2002, the Department shall allocate all

the allowances comprising the base emission budget for New Jersey in accordance

with N.J.A.C. 7:27-31.7, Annual allowance allocation. In the year 2003 and

each year thereafter, the Department shall first reserve 4,822 of the allowances

in the base emission budget for New Jersey, by transferring them into a

discretionary general account held by the Department, and shall then allocate

the remainder of the allowances in the base budget (that is, 8,200 allowances).

In the judgement of the Commissioner, the Department shall only either retire

an allowance reserved in the discretionary account or use it for any other

purpose which would contribute toward the attainment or maintenance of the

National Ambient Air Quality Standard for ozone in New Jersey.</B>

<P>

<B>(f) A New Jersey holder of an account in the NATS is subject to the applicable

requirements of this subchapter. This includes the requirement, set forth

at N.J.A.C. 7:27-31.13, NOx Allowance Tracking System, to designate an authorized

account representative (AAR). Only the AAR of an account may authorize the

transfer of an allowance from the account to another account in accordance

with the procedures set forth at N.J.A.C. 7:27-31.10, Allowance transfer,

use, and retirement.</B>

<P>

<B>(g) Pursuant to N.J.A.C. 7:27-31.16(c), the owner or operator of each

budget source located in New Jersey shall monitor the emissions of each budget

source in accordance to the monitoring plan approved by the Department pursuant

to N.J.A.C. 7:27-31.14, Emissions monitoring, and report the source's actual

NOx emissions during that year's control period to the NETS Administrator.

At the request of the member jurisdictions of the OTC, the United States

Environmental Protection Agency's Acid Rain Division has agreed to serve

as the NETS Administrator. Correspondence for NETS Administrator shall be

addressed as follows:</B>

<P>

<B>ATTN: NOX BUDGET PROGRAM</B>

<P>

<B>United States Environmental Protection Agency</B>

<P>

<B>Acid Rain Division - Mail Code 6204J</B>

<P>

<B>401 M Street SW</B>

<P>

<B>Washington, DC 20460</B>

<P>

<B>(h) The date of a submission to the NATS or NETS shall be considered to

be the date indicated by the official U.S. Postal Service postmark on the

envelope in which the document is mailed or, if the submission is made

electronically, the electronic time stamp of the receiving agency.</B>

<P>

<B>(i) In the year 1999 and in each year thereafter, the owner or operator

of a budget source shall ensure that, by the allowance transfer deadline,

the allowances which are held for the budget source in a compliance account

and which are valid for use in the current year are equal to or greater than

the allowances to be deducted from the account pursuant to N.J.A.C. 7:27-31.17,

End-of-season reconciliation. The number of allowances to be deducted is

equal to the total number of tons NOx actually emitted from the budget source

during that year's control period as reported pursuant to (g) above.</B>

<P>

<B>(j) Following each year's control period, the NATS administrator shall

deduct and permanently retire allowances from each budget source's compliance

account to reconcile the emissions of the budget source during the preceding

control period pursuant to N.J.A.C. 7:27-31.17, End-of-season

reconciliation.</B>

<P>

<B>(k) All allowances shall be allocated, transferred, used, or retired as

whole allowances. Unless otherwise specified, in any computation to determine

the number of whole allowances to be allocated, transferred, used or retired,

the amount of allowances shall be rounded down for decimals less than 0.50

and rounded up for decimals of 0.50 or greater. Also, unless otherwise specified,

in any computation to calculate emissions, including emissions during the

May 1 and September 30 period in 1990 under N.J.A.C. 7:27-31.4, Opt-in

provisions, or N.J.A.C. 7:27-21.12, Early reductions, the NOx emissions shall

be rounded down to the nearest ton for decimals less than 0.50 and rounded

up for decimals of 0.50 or greater.</B>

<P>

<B>(l) Allowances are valid only for the purposes of meeting the requirements

of this subchapter and cannot be used to authorize the exceedance of the

limitations of a permit or of another applicable rule or regulation.</B>

<P>

<B>(m) An allowance shall not constitute a security and does not constitute

or convey a property right. Nothing in this subchapter shall be construed

to limit the authority of the Department to condition, limit, suspend or

terminate any allowances or authorization to emit which said allowance

represents.</B>

<P>

<B>(n) Nothing in this subchapter waives any Federal or State requirement

that otherwise applies to a budget source, including, but not limited to:

the Reasonably Available Control Technology standards for NOx at N.J.A.C.

7:27-19; requirements pertaining to the construction of new or modified sources

at N.J.A.C. 7:27-8, 18 and 22; and the requirements pertaining to the federal

acid rain program at 40 C.F.R. Part 75.</B>

<P>

  <HR>

<P>

<B>7:27-31.4 Opt-in provisions</B>

<P>

<B>(a) An owner or operator of a stationary source, that is neither a fossil

fuel fired boiler or indirect heat exchanger with a maximum rated heat input

capacity of at least 250 MMBtu per hour nor an electric generating unit with

a rated output of at least 15 MW, may request approval from the Department

to opt the source into the NOx Budget Program in accordance with the provisions

of this section.</B>

<P>

<B>(b) Any person seeking to opt a stationary source into the NOx Budget

Program shall submit the information required by this section, on application

forms obtained from the Department, to the following address:</B>

<P>

<B>ATTN: NOX BUDGET OPT-IN</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Office of Air Quality Management</B>

<P>

<B>401 East State Street -- P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418</B>

<P>

<B>(c) An application submitted pursuant to (b) above shall include the following

information:</B>

<P>

<B>1. Identification of the owner of the proposed opt-in source, including

the name of the company, its mailing address, and telephone number;</B>

<P>

<B>2. Identification of the proposed opt-in source, including the facility

identification number, source identification number, fuels allowed to be

burned, heat input capacity of the source, lowest allowable NOx emission

rate for each type of fuel allowed to be burned, any other applicable limits

on operation;</B>

<P>

<B>3. Information regarding the operation of the proposed opt-in source during

the period May 1 through September 30 for each of the five preceding years.

This information will be used by the Department in order to determine the

baseline emissions. Such information includes, for each type of fuel burned,

and for each of the five previous control periods (or, if the source has

operated for less than five years, for the control periods in each year of

operation):</B>

<P>

<B>i. The source's actual heat input, expressed in MMBtu;</B>

<P>

<B>ii. The source's NOx emissions, expressed in pounds;</B>

<P>

<B>iii. The total productivity of the source expressed in MW-hr of net electric

output and, for source that produces useful heat, in MMBtu of net useful

heat output; and</B>

<P>

<B>iv. Documentation as to how (c)3i through iii above were determined;</B>

<P>

<B>4. An emission monitoring plan for the source operation consistent with

the requirements at N.J.A.C. 7:27-31.14 and the "Guidance for Implementation

of Emission Monitoring Requirements for the NOx Budget Program." This guidance

document, which was prepared for the OTC and USEPA and prepared by Perrin

Quarles Associates, Inc., January 28, 1997, is incorporated herein by reference,

as are any subsequent revisions thereto. Copies of this document may be

downloaded from USEPA Acid Rain Division's world wide web page, at

&lt;http://www.epa.gov/acidrain&gt;, or may be requested by writing to the

following address:</B>

<P>

<B>ATTN: NOX BUDGET PROGRAM</B>

<P>

<B>United States Environmental Protection Agency</B>

<P>

<B>Acid Rain Division - Mail Code 6204J</B>

<P>

<B>401 M Street SW</B>

<P>

<B>Washington, DC 20460</B>

<P>

<B>5. Designation of an AAR pursuant to N.J.A.C. 7:27-31.13; and</B>

<P>

<B>6. Any other information requested by the Department for use in its review

of the application.</B>

<P>

<B>(d) Based on the information submitted pursuant to (b) above, the Department

shall determine the amount of allowances that would be added to the New Jersey

emission budget each year to accommodate the source, if it is approved as

an opt-in source. This amount shall be determined in accordance with (i)

and (j) below.</B>

<P>

<B>(e) The Department shall not approve an application for an opt-in if:</B>

<P>

<B>1. The applicant fails to:</B>

<P>

<B>i. Provide the information required pursuant to (c) above; or</B>

<P>

<B>ii. Propose in the monitoring plan a method for quantifying emissions

from the source of sufficient accuracy and reliability on which to base

determination of the source's compliance each year with N.J.A.C. 7:27-31.3(i);

or</B>

<P>

<B>2. The proposed opt-in source is not a type of source for an emissions

monitoring plan consistent with the "Guidance for Implementation of Emission

Monitoring Requirements for the NOx Budget Program" and the requirements

at N.J.A.C. 7:27-31.14 can be developed.</B>

<P>

<B>(f) If the Department reaches a preliminary determination to approve an

opt-in application, the Department shall publish notice of this intent in

the New Jersey Register and provide the interested public an opportunity

to comment. In addition, the Department will seek comment from the members

of the OTC who are also implementing NOx Budget Programs. The notice shall

specify the amount by which the Department intends to increase the New Jersey

emissions budget each year to accommodate the proposed opt-in source. The

comment period shall be at least 30 days commencing with the Register's date

of publication. The Department shall take into consideration the comment

received during the public comment period when making its final determination

as to whether to approve the opt-in application.</B>

<P>

<B>(g) Upon approval of the opt-in application, the source shall be considered

a budget source and shall be subject to all terms and conditions of the NOx

Budget Program, including requirements for allowance transfer or use, emissions

monitoring, recordkeeping, reporting, and penalties.</B>

<P>

<B>(h) If, at the time of approval of an opt-in application, the amount by

which the Department increases the New Jersey emissions budget in any given

year to accommodate the opt-in source is more than the amount specified in

New Jersey Register notice, published pursuant to (f) above, the Department

shall publish a second notice in which it specifies this revised amount and

sets forth the reasons for this revision.</B>

<P>

<B>(i) If an opt-in source has a maximum rated heat input capacity of 250

MMBtu per hour or greater, the number of allowances to be to be added to

the New Jersey emissions budget to accommodate the source shall be determined

as follows:</B>

<P>

<B>1. The Department shall select the two consecutive annual May 1 through

September 30 periods, from the five years preceding the opt-in application,

during which the actual operation of the source best represents, in its

judgement, normal activity for the source;</B>

<P>

<B>2. The source's actual average baseline heat input and average baseline

NOx emissions rate shall be determined for the two consecutive May 1 through

September 30 periods selected pursuant to (i)1 above;</B>

<P>

<B>3. For the years 1999, 2000, 2001, and 2002, the number of allowances

to be added to the New Jersey emissions budget shall be the amount which

is the least of the following:</B>

<P>

<B>i. The source's actual average baseline heat input, as determined in (i)2

above, multiplied by the greater of the following rates:</B>

<P>

<B>(1) The rate which is 35 percent of the source's average baseline NOx

emissions rate, as determined in (i)2 above; or</B>

<P>

<B>(2) The rate of 0.20 pounds per MMBtu;</B>

<P>

<B>ii. The sum of the products obtained by multiplying the lowest allowable

NO<SUB>x</SUB> emission rate applicable at the time of the application for

each fuel by the actual average baseline heat input for that fuel; and</B>

<P>

<B>iii. The maximum allowable NO<SUB>x</SUB> emissions during a control period

as established by any permit or any law or rule; and</B>

<P>

<B>4. For the year 2003, and each year thereafter, the number of allowances

to be added to the New Jersey emissions budget shall be the amount which

is the least of the following:</B>

<P>

<B>i. The source's actual average baseline heat input, as determined in (i)2

above, multiplied by the greater of the following rates:</B>

<P>

<B>(1) The rate which is 10 percent of the source's average baseline

NO<SUB>x</SUB> emissions rate, as determined in (i)2 above; or</B>

<P>

<B>(2) The rate of 0.15 pounds per MMBtu;</B>

<P>

<B>ii. The sum of the products obtained by multiplying the lowest allowable

NO<SUB>x</SUB> emission rate applicable at the time of the application for

each fuel by the actual average baseline heat input for that fuel; and</B>

<P>

<B>iii. The maximum allowable NO<SUB>x</SUB> emissions during a control period

as established by any permit or any law or rule.</B>

<P>

<B>(j) If an opt-in source has a maximum rated heat input capacity of less

than 250 MMBtu per hour, the number of allowances to be to be added to the

New Jersey emissions budget to accommodate the source shall be determined

as follows:</B>

<P>

<B>1. Select the two consecutive annual May 1 through September 30 periods,

from the five years preceding the opt-in application, during which the actual

operation of the source best represents, in the judgement of the Department,

normal activity;</B>

<P>

<B>2. Determine the source's actual average baseline heat input and average

baseline NO<SUB>x</SUB> emissions during the two consecutive May 1 through

September 30 periods selected pursuant to (j)1 above;</B>

<P>

<B>3. The number of allowances to be added to the New Jersey emissions budget

shall be the amount which is the least of the following:</B>

<P>

<B>i. The source's average baseline NO<SUB>x</SUB> emissions, as determined

in (j)2 above;</B>

<P>

<B>ii. The sum of the products obtained by multiplying the lowest allowable

NO<SUB>x</SUB> emission rate applicable at the time of the application for

each fuel by the actual average baseline heat input for that fuel; and</B>

<P>

<B>iii. The maximum allowable NO<SUB>x</SUB> emissions during a control period

as established by any permit or any law or rule.</B>

<P>

<B>(k) The total amount of allowances allocated to an opt-in source in any

given year shall not exceed the final amount approved for the source, pursuant

to (f) or (h) above. If the productivity of the source is curtailed, an amount

of allowances shall be deducted pursuant to N.J.A.C. 7:27-31.17(g)3.</B>

<P>

<B>(l) The Department shall reduce the total amount by which the New Jersey

emissions budget is increased each year to accommodate a source, if a new

rule or law establishes an applicable maximum allowable emission rate which

is more stringent than the rate originally used to determine, under (d) and

(h) above, the amount the budget would be increased to accommodate the

source.</B>

<P>

<B>(m) For any opt-in source which is subsequently repowered or replaced,

the amount by which the New Jersey emissions budget is increased in any given

year to accommodate the source shall continue to be the final amount originally

approved for the opt-in source pursuant to (f) and (g) above. The source

which is repowering or replacing the opt-in source shall continue to be allocated

the full amount, provided that the productivity of the repowered or replaced

source is at least as great as that of the original opt-in source and no

new law or rule establishes a lower allowable emissions limit applicable

to the original opt-in source. Otherwise the amount shall be adjusted pursuant

to (k) or (l) above, as applicable.</B>

<P>

<B>(n) Each year, prior to December 31, the Department shall provide the

following information to the Administrator of the NATS:</B>

<P>

<B>1. A list of all sources that are opt-in sources, including any new opt-in

sources approved that year; and</B>

<P>

<B>2. The number of allowances by which the current year New Jersey emissions

budget has been increased, for each opt-in source, to accommodate that

source.</B>

<P>

<B>(o) An owner or operator who elects to opt a source into the

NO<SUB>x</SUB> Budget Program shall not opt the source out of the program.

The source shall remain in the program and remain subject to the requirements

of this subchapter until:</B>

<P>

<B>1. The source has ceased to operate and:</B>

<P>

<B>i. Any permits and certificates issued for the source pursuant to N.J.A.C.

7:27-8 have been canceled; and</B>

<P>

<B>ii. The provisions of any operating permit issued pursuant to N.J.A.C.

7:27-22 pertaining to the source have been removed; or</B>

<P>

<B>2. The source has been replaced, in which the replacement source shall

become a budget source.</B>

<P>

  <HR>

<P>

<B>7:27-31.5 Interface with the emission offset program</B>

<P>

<B>(a) Any owner or operator of a new or modified budget source which is

subject to the emission offset requirements at N.J.A.C. 7:27-18 shall meet

the applicable emission offset requirements of that subchapter as well as

the requirements of this subchapter. Obtaining and holding sufficient allowances

for a source under this subchapter does not relieve an owner or operator

from the obligation also to obtain any required emission offsets.</B>

<P>

<B>(b) Allowances shall be allocated from New Jersey's emissions budget to

a new or modified budget source in accordance with N.J.A.C. 7:27-31.7. New

Jersey's base emission budget is established at N.J.A.C. 7:27-31.3(b), and

shall not be increased to accommodate the new or modified source.</B>

<P>

<B>(c) If a budget source's emission reductions, which are creditable emission

reductions under N.J.A.C. 7:27-18.5, are secured for use, by the owner or

operator of the budget source or by another person, as NOx emission offsets

for a source which is not a budget source, the owner or operator of the budget

source shall report this to the Department. The NATS administrator shall

deduct allowances from the budget source's compliance account commensurate

in value, in terms of control period emissions, to the emission offsets secured

for use by the source which is not a budget source, unless the owner or operator

of the source using the emission offsets opts the source for which the emission

offsets are being secured into the NOx Budget Program prior to the date the

Department approves a permit for that source. However, if creditable emission

reductions generated by a budget source are secured for use as NOx emission

offsets by another budget source, no such deduction will be made.</B>

<P>

  <HR>

<P>

<B>7:27-31.6 Interface with the open market emissions trading program</B>

<P>

<B>(a) NOx emission reductions made by a budget source during any control

period may not be used as the basis for a DER credit under N.J.A.C.

7:27-30.</B>

<P>

<B>(b) Except as provided in the provisions for early reductions at N.J.A.C.

7:27-31.12, Early reductions, DER credits shall not be converted to allowances

and used to satisfy the requirements of this subchapter.</B>

<P>

<B>(c) Allowances shall not be converted to DER credits and used pursuant

to the Open Market Trading Program rules at N.J.A.C. 7:27-30, except as provided

at N.J.A.C. 7:27-31.8, which allows electric consumers who earn allowances

by saving electricity through energy efficiency projects to elect to receive

DER credits, instead of allowances. In such case the NATS Administrator shall

permanently retire the allowances that would otherwise have been provided

to the electric consumer.</B>

<P>

  <HR>

<P>

<B>7:27-31.7 Annual allowance allocation</B>

<P>

<B>(a) Beginning in 1999, the Department shall allocate allowances each year

in accordance with this section. For the years 1999, 2000, 2001 and 2002,

the Department shall allocate the New Jersey emissions budget in accordance

with (b) and (c) below; for the year 2003 and each year thereafter, the

Department shall allocate the New Jersey emissions budget in accordance with

(d) and (e) below. In addition, in each of these years, the Department shall

allocate additional allowances to opt-in sources in accordance with (f) below.

Also, in the year 1999, the Department shall allocate allowances in accordance

with (g) below to sources which have been approved to receive early reduction

allowances pursuant to N.J.A.C. 7:27-31.12.</B>

<P>

<B>(b) Prior to the control period in each of the years 1999, 2000, 2001,

and 2002, the Department shall allocate 17,340 allowances of the New Jersey

emissions budget, minus any allowances that have been previously allocated

pursuant to (c)3ii or (i) below, or pursuant to N.J.A.C. 7:27-31.17(h). This

subsection does not apply to opt-in sources; opt-in sources are addressed

separately in(f) below. The Department shall allocate allowances in accordance

with the following steps:</B>

<P>

<B>1. Step 1: This step determines the number of allowances which are to

be allocated to the New Source Reserve. The purpose of this reserve is to

hold aside a pool of allowances, so that they are available for distribution

after the control period to new budget sources which have not operated for

two full May 1 through September 30 periods. The number of allowances to

be allocated to this reserve in this step is based on each new budget source's

allowable emissions for the control period. For each new budget source, the

Department shall allocate allowances from the New Jersey NOx emission budget

into the New Source Reserve in accordance with the following equation:</B>

<B></B>

<P ALIGN=Center>

<B>Allowances = &nbsp; (Allowable Emission Rate x Allowable Activity) /

2,000</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>Allowable Emission Rate = The allowable emission rate, expressed in pounds

per unit of activity. If more than one fuel is allowed to be used, the allowable

emission rate shall be the weighted average of the allowable emission rates

for each fuel type;</B>

<P>

<B>Allowable Activity = The maximum allowable activity of the source for

the control period which is based on the lesser of the maximum capacity and

any limit on the activity during the control period as established by any

law, rule or permit; and</B>

<P>

<B>2,000 = The factor converting pounds into tons;</B>

<P>

<B>2. Step 2: This step determines the number of allowances which are to

be allocated to the Growth Reserve. The purpose of this reserve is to hold

aside a pool of allowances, so that they are available for distribution after

the control period to certain budget sources to accommodate an increase in

fuel use. The number of allowances to be allocated to this reserve in this

step is based on up to a 50 percent increase in the average heat input of

budget sources having emission rates not greater than 0.15 pounds per MMBtu.

The number of allowances to be allocated to the reserve is calculated in

accordance with the following procedure for each budget source that is not

a new budget source:</B> <B>i. Calculate the average NOx emission rate

(ER<SUB>NOx</SUB>) of the source, expressed in pounds per MMBtu, in accordance

with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>ER<SUB>NOx</SUB> = (E1 + E2) / (H1 + H2)</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>E1 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the greatest actual heat input;</B>

<P>

<B>E2 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the second greatest actual heat input;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input; and</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input;</B>

<P>

<B>ii. If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (b)2i above is greater than 0.15 pounds of NOx per MMBtu,

then no allowances shall be allocated to the Growth Reserve with respect

to the source.</B>

<P>

<B>iii. If the average NOx Emission Rate (ER<SUB>NOx</SUB>) of the source

as calculated in (b)2i above is not greater than 0.15 pounds of NOx per MMBtu,

then allowances shall be allocated to the Growth Reserve in accordance with

the following procedure:</B>

<P>

<B>(1) Calculate 150 percent of the average actual heat input of the two

control periods, out of the last three years, which had the highest heat

input in accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>H<SUB>150%</SUB> = 1.5 x {(H1 + H2) / 2}</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>H<SUB>150%</SUB> = 150 percent of the average actual heat input of the

two control periods, out of the last three years, which had the highest heat

input;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input; and</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input;</B>

<P>

<B>(2) If H<SUB>150%</SUB>, as determined in (b)2iii(1) above, is not greater

than the maximum allowable heat input of the source during the control period,

then number of allowances to be allocated to the reserve is calculated in

accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = ER<SUB>NOx</SUB> x 0.5 x {(H1 + H2) / 2} x (1/2,000)</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>ER<SUB>NOx</SUB> = The average actual NOx emission rate, expressed in

pounds per MMBtu, as calculated in (b)2i above;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>(3) If the result of (b)2iii(1) above is greater than the maximum allowable

heat input of the source during the control period, then number of allowances

to be allocated to the reserve is calculated in accordance with the following

equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = ER<SUB>NOx</SUB> x {H<SUB>Allowable</SUB> - (H1 + H2) / 2}

x (1/2,000)</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>ER<SUB>NOx</SUB> = The average actual NOx emission rate, expressed in

pounds per MMBtu, as calculated in (b)2i above;</B>

<P>

<B>H<SUB>Allowable</SUB> = The maximum allowable heat input of the source

for the control period which is based on the lesser of the maximum heat input

capacity and any limit on the heat input during the control period as established

by any law, rule or permit;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>(AGENCY NOTE: The Department is considering two alternative methods for

providing allowances to meet Incentive Claims, and is seeking comment on

which of these two methods should be adopted. These two alternatives are

set out at (c)3ii below. If the second alternative is selected, all references

throughout the rule to an Incentive Reserve, including Step 3 proposed below,

would be omitted upon adoption. After taking into consideration the comments

received on the two alternatives during the public comment period, the Department

intends to adopt one of these two alternatives.)</B>

<P>

<B>3. Step 3: This step determines the number of allowances which are to

be allocated from the New Jersey emission budget to the Incentive Reserve.

The purpose of this reserve is to hold aside a pool of allowances so that,

after the control period, they are available for distribution to persons

who demonstrate that they have saved or generated electricity during the

control period by implementing certain environmentally beneficial techniques.

The number of allowances to be allocated from the New Jersey emission budget

into this reserve in this step is based on the operation of those sources

having an average actual NOx emission rate, (ERNOx) calculated in (b)2i above,

not greater than 0.15 pounds of NOx per MMBtu. The number of allowances to

be allocated from the New Jersey emission budget into this reserve in this

step is calculated in accordance with the following procedure for each budget

source that is not a new budget source:</B>

<P>

<B>i. If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source as

calculated in (b)2i above is greater than 0.15 pounds of NOx per MMBtu, then

no allowances shall be allocated to this reserve with respect to the source;

and</B>

<P ALIGN=Left>

<B>ii. If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (b)2i above is not greater than 0.15 pounds of NOx per MMBtu,

then the number of allowances to be allocated to the Incentive Reserve is

determined in accordance with the following:</B> <B>(1) Calculate the weighted

allowable emission rate (ER<SUB>Allowable</SUB>), expressed in pounds per

MMBtu, using the following equation:</B>

<P ALIGN=Left>

<P ALIGN=Center>

<IMG SRC="eqn2.gif" ALT="" HEIGHT=155 WIDTH=637>

<P ALIGN=Left>

<B>Where:</B>

<P>

<B>n = The number of types of fuel burned during the two control periods

out of the last three which had the greatest heat input;</B>

<P>

<B>AER<SUB>i</SUB> = The lowest allowable emission rate, expressed in pounds

per MMBtu, for the source for each type of fuel burned during the two control

periods out of the last three which had the greatest heat input;</B>

<P>

<B>H1<SUB>i</SUB> = The heat input, expressed in MMBtu, for each type of

fuel burned during the following control period: of the most recent three

control periods, the control period during which the source had the greatest

actual heat input; and</B>

<P>

<B>H2<SUB>i</SUB> = The heat input, expressed in MMBtu, for each type of

fuel burned during the following control period: of the most recent three

control periods, the control period during which the source had the second

greatest actual heat input;</B>

<P>

<B>(2) If the weighted allowable emission rate (ER<SUB>Allowable</SUB>) as

calculated in (b)3ii(1) above is less than 0.15 pounds of NOx per MMBtu,

then the number of allowances to be allocated to reserve is determined in

accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = {(ER<SUB>Allowable</SUB> - ER<SUB>NOx</SUB>) / 2} x &nbsp;{(H1

+ H2) / 2}&nbsp; x (1/2,000)&nbsp;</B>

<P>

<B>Where:</B>

<P>

<B>ER<SUB>NOx</SUB> = The average NOx emission rate, expressed in pounds

per MMBtu, as calculated in (b)2i above;</B>

<P>

<B>ER<SUB>Allowable</SUB> = The weighted allowable emission rate, expressed

in pounds per MMBtu, as calculated in (b)3ii(1) above;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons; and</B>

<P>

<B>(3) If the weighted allowable emission rate (ER<SUB>Allowable</SUB>) as

calculated in (b)3ii(1) above is not less than 0.15 pounds per MMBtu, then

the number of allowances to be allocated to the reserve is determined in

accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = &nbsp; {(0.15 - ER<SUB>NOx</SUB>) / 2} x &nbsp;{(H1 + H2)

/ 2}&nbsp; x &nbsp;(1/2,000)&nbsp;</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>ER<SUB>NOx</SUB> = The average NOx emission rate, expressed in pounds

per MMBtu, as calculated in (b)2i above;</B>

<P>

<B>0.15 = The lesser of the allowable emission rate and 0.15 pounds per MMBtu,

which is the maximum rate at which allowances are allocated in this step;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>4. Step 4: This step is a preliminary determination of the number of

allowances which are to be allocated in (b)5 (Step 5) below to each budget

source that is not a new budget source. For this step, the Department shall

use the following procedure:</B>

<P>

<B>i. If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source as

calculated in (b)2i above is greater than 0.15 pounds of NOx per MMBtu, then

the number of allowances determined in this step is calculated in accordance

with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (0.15 / 2,000) x (H1 + H2) / 2</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>0.15 = The allocation rate, expressed in pounds per MMBtu, which is the

maximum rate to be used for the allocation of allowances in this step;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>ii. If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (b)2i above is not greater than 0.15 pounds of NOx per MMBtu,

then the preliminary determination of the number of allowances to be allocated

to the source is calculated in accordance with the following procedure:</B>

<P>

<B>(1) If the weighted allowable emission rate (ER<SUB>Allowable</SUB>) as

calculated in (b)3ii(1) above is less than 0.15 pounds of NOx per MMBtu,

then the preliminary determination of the number of allowances to be allocated

to the source is calculated in accordance with the following equation:</B>

<B></B>

<P ALIGN=Center>

<B>Allowances = {(ER<SUB>NOx</SUB> + ER<SUB>Allowable</SUB>) / 2} x {(H1

+ H2) / 2}&nbsp; x &nbsp;(1/2,000)&nbsp;</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>ER<SUB>NOx</SUB> = The average NOx emission rate, expressed in pounds

per MMBtu, as calculated in (b)2i above;</B>

<P>

<B>ER<SUB>Allowable</SUB> = The weighted allowable emission rate, expressed

in pounds per MMBtu, as calculated in (b)3ii(1) above;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>(2) If the weighted allowable emission rate (ER<SUB>Allowable</SUB>) as

calculated in (b)3ii(1) above is not less than 0.15 pounds per MMBtu, then

the preliminary determination of the number of allowances to be allocated

to the source is calculated in accordance with the following equation:</B>

<B></B>

<P ALIGN=Center>

<B>Allowances = {(ER<SUB>NOx</SUB> + 0.15) / 2} x {(H1 + H2) / 2}&nbsp; x

&nbsp;(1/2,000)&nbsp;</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>ER<SUB>NOx</SUB> = The average NOx emission rate, expressed in pounds

per MMBtu, as calculated in (b)2i above;</B>

<P>

<B>0.15 = The lesser of the allowable emission rate and 0.15 pounds per MMBtu,

which is the maximum rate at which allowances are allocated in this step;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons; and</B>

<P>

<B>5. Step 5: The Department shall allocate the remainder of the allowances

as follows:</B>

<P>

<B>i. The sum of the following shall be determined:</B>

<P>

<B>(1) The number of allowances allocated to the New Source Reserve in (b)1

(Step 1) above;</B>

<P>

<B>(2) The number of allowances allocated to the Growth Reserve in (b)2 (Step

2) above;</B>

<P>

<B>(3) The number of allowances allocated to the Incentive Reserve in (b)3

(Step 3) above;</B>

<P>

<B>(4) The number of allowances that have been previously allocated pursuant

to (c)3ii or (i) below, or pursuant to N.J.A.C. 7:27-31.17(h); and</B>

<P>

<B>(5) The number of allowances preliminarily determined in (b)4 (Step 4)

above to be allocated to each budget source that is not a new budget

source;</B>

<P>

<B>ii. If the sum in (b)5i above is less than or equal to 17,340, then the

Department shall allocate allowances as follows:</B>

<P>

<B>(1) Allowances shall be allocated to each budget source that is not a

new budget source, as preliminarily determined in (b)4 (Step 4) above; and</B>

<P>

<B>(2) The remaining allowances shall be allocated to companies which operated

budget sources in 1990. These companies are listed in Table 1 below. The

number of allowances to be allocated to a given company shall be determined

in accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (C% / 100) x A<SUB>R</SUB></B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>C% = The percent that activity of a given company contributes to the 17,054

allowances of the emission budget for New Jersey for the years 1999 through

2002 as listed in Table 1 below; and</B>

<P>

<B>A<SUB>R</SUB> = The remaining number of allowances, which have not been

allocated in (b)1 through 3 (Steps 1 through 3) and (b)5ii(1) above.</B>

<CENTER>

  <TABLE BORDER=8 CELLPADDING=2 >

    <CAPTION>

    </CAPTION>

    <TR>

      <TD COLSPAN="3">

	<CENTER>

	  <B>TABLE 1</B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TH>

	COMPANY

      </TH>

      <TH>

	Contribution to 1999 - 2002

	<P>

	NJ's Base Budget

      </TH>

      <TH>

	PERCENT OF TOTAL

      </TH>

    </TR>

    <TR>

      <TD>

	<B>ATLANTIC ELECTRIC </B>

      </TD>

      <TD>

	<CENTER>

	  <B>2,717 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>15.93175% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>CHEVRON PRODUCTS COMPANY </B>

      </TD>

      <TD>

	<CENTER>

	  <B>21 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>0.12314% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>CIBA GEIGY </B>

      </TD>

      <TD>

	<CENTER>

	  <B>23 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>0.13487% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>COASTAL CORPORATION </B>

      </TD>

      <TD>

	<CENTER>

	  <B>404 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>2.36895% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>COGEN TECHNOLOGIES ENERGY GROUP </B>

      </TD>

      <TD>

	<CENTER>

	  <B>67 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>0.39287% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>GENERAL PUBLIC UTILITIES CORPORATION </B>

      </TD>

      <TD>

	<CENTER>

	  <B>948 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>5.55881% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>MILFORD POWER, LIMITED PARTNERSHIP </B>

      </TD>

      <TD>

	<CENTER>

	  <B>55 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>0.32250% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>MOBIL OIL CORPORATION </B>

      </TD>

      <TD>

	<CENTER>

	  <B>336 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>1.97021% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>PRIME ENERGY </B>

      </TD>

      <TD>

	<CENTER>

	  <B>227 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>1.33107% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>PUBLIC SERVICE ELECTRIC AND GAS COMPANY </B>

      </TD>

      <TD>

	<CENTER>

	  <B>11,506 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>67.46804% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>ROCHE VITAMINS INCORPORATED </B>

      </TD>

      <TD>

	<CENTER>

	  <B>398 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>2.33376% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>TOSCO REFINERY </B>

      </TD>

      <TD>

	<CENTER>

	  <B>297 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>1.74153% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>CITY OF VINELAND ELECTRIC UTILITY </B>

      </TD>

      <TD>

	<CENTER>

	  <B>55 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>0.32250% </B>

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	<B>TOTAL </B>

      </TD>

      <TD>

	<CENTER>

	  <B>17,054 </B>

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  <B>100.00000% </B>

	</CENTER>

      </TD>

    </TR>

  </TABLE>

</CENTER>

<P>

<B>NOTE: The total in this table represents the application of the emission

reductions called for by the OTC MOU on the 1990 budget sources and does

not include the 286 allowances assigned to New Jersey, which are the allowances

attributed to New Jersey's portion of the baseline "10,000 ton reserve."</B>

<P>

<B>iii. If the sum determined in (b)5i above is greater than 17,340, then

the Department shall allocate the remaining allowances to budget sources

in proportion to the amount of preliminarily determined in (b)4 (Step 4)

above. The proportional share to be allocated to each shall be determined

as follows:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = {(17,340 - A0 - A1 - A2) / PA<SUB>Total</SUB>} x PA</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>A0 = The total number of allowances that have been previously allocated

pursuant to (c)3ii or (i) below, or pursuant to N.J.A.C. 7:27-31.17(h);</B>

<P>

<B>A1 = The total number of allowances allocated to the New Source Reserve

in (b)1 (Step 1) above;</B>

<P>

<B>A2 = The total number of allowances allocated to the Growth Reserve in

(b)2 (Step 2) above;</B>

<P>

<B>A3 = The total number of allowances allocated to the Incentive Reserve

in (b)3 (Step 3) above;</B>

<P>

<B>PA = The number of allowances preliminarily determined for allocation

to the source as determined in (b)4 (Step 4) above; and</B>

<P>

<B>PA<SUB>Total</SUB> = The sum of all allowances preliminarily determined

for allocation to all budget sources in (b)4 (Step 4) above.</B>

<P>

<B>(c) For the years 1999, 2000, 2001, and 2002, after each control period,

the Department shall allocate allowances from the New Source Reserve, the

Growth Reserve, and the Incentive Reserve as follows:</B>

<P>

<B>1. The Department shall allocate the allowances in the New Source Reserve

by December 15 of the current year as follows:</B>

<P>

<B>i. For any new budget source, the Department shall allocate allowances

equal to the number of tons of NOx emitted by the source during the control

period, provided that the emissions do not exceed any applicable maximum

allowable emissions limit; and</B>

<P>

<B>ii. If there are allowances remaining in the New Source Reserve after

the allocation of allowances in accordance with (c)1i above, the Department

shall allocate these allowances to companies which operated budget sources

in 1990. These companies are listed in Table 1 above. The number of allowances

to be allocated to a given company shall be determined in accordance with

the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (C% / 100) x A<SUB>R</SUB></B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>C% = The percent that activity of a given company contributes to the 17,054

allowances of the base emission budget for New Jersey for the years 1999

through 2002 as listed in Table 1 above; and</B>

<P>

<B>A<SUB>R</SUB> = The remaining number of allowances in the New Source Reserve,

which have not been allocated in (c)1i above;</B>

<P>

<B>2. The Department shall allocate allowances in the Growth Reserve by December

15 of the current year as follows:</B>

<P>

<B>i. For each budget source that is not a new budget source and that operated

at an average actual emission rate of 0.15 pounds of NOx per MMBtu or less

during the control period, the Department shall allocate allowances according

to the following procedure:</B>

<P>

<B>(1) Calculate the average actual emission rate for the control period

of the current year (ERActual) in accordance with the following equation:</B>

<B></B>

<P ALIGN=Center>

<B>ER<SUB>Actual</SUB> = EA / HA</B>

<P>

<B>Where: &nbsp;</B>

<P>

<B>EA = Actual emissions during the control period, expressed in pounds of

NOx; and</B>

<P>

<B>HA = Actual heat input during the control period, expressed in MMBtu;</B>

<P>

<B>(2) If the average actual emission rate (ERActual) for the budget source

as calculated in accordance with (c)2i(1) above is greater than 0.15 pounds

per MMBtu or if the actual emissions during the control period is less than

the number of allowances allocated to the source pursuant to (b)5ii(1) or

(b)5iii above, then the Department shall allocate no allowances from the

Growth Reserve to the budget source;</B>

<P>

<B>(3) Except as provided in (c)2iii below, if the average actual emission

rate (ERActual) for the budget source as calculated in accordance with (c)2i(1)

above is not greater than 0.15 pounds per MMBtu and if the actual emissions

during the control period is greater then than the number of allowances allocated

to the source pursuant to to (b)5ii(1) or (b)5iii above, then the Department

shall allocate allowances from the Growth Reserve to the budget source in

accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = E<SUB>Actual</SUB> - A</B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>Actual</SUB> = The total NOx emissions, expressed in tons, of the

source during the control period, minus any emissions due to the exceedance

of an applicable maximum allowable emissions limit; and</B>

<P>

<B>A = The number of allowances allocated to the source pursuant to (b)5ii(1)

or (b)5iii above;</B>

<P>

<B>ii. If there are allowances remaining in the Growth Reserve after the

allocation of allowances in accordance with (c)2i above, the Department shall

allocate these allowances to companies which operated budget sources in 1990.

These companies are listed in Table 1 above. The number of allowances to

be allocated to a given company shall be determined in accordance with the

following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (C% / 100) x A<SUB>R</SUB></B>

<P>

<B>Where:</B>

<P>

<B>C% = The percent that activity of a given company contributes to the 17,054

allowances of the base emission budget for New Jersey for the years 1999

through 2002 as listed in Table 1 above; and</B>

<P>

<B>A<SUB>R</SUB> = The remaining number of allowances in the Growth Reserve

which have not been allocated in (c)2i above;</B>

<P>

<B>iii. If there are not enough allowances in the Growth Reserve to allocate

allowances to all of the eligible sources accordance with (c)2i above, then

the Department shall prorate the allocations to each source according to

the amount of allowances each source would have otherwise received in accordance

with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (A<SUB>Source</SUB> / A<SUB>Total</SUB>) x

A<SUB>Reserve</SUB></B>

<P>

<B>Where:</B>

<P>

<B>A<SUB>Source</SUB> = The number of allowances as determined in (c)2i above

for each source;</B>

<P>

<B>A<SUB>Total</SUB> = The total number of allowances as determined in (c)2i

above for all of the eligible sources; and</B>

<P>

<B>A<SUB>Reserve</SUB> = The number of allowances in the Growth Reserve;</B>

<P>

<B>3. The Department shall allocate allowances for the implementation of

environmentally beneficial techniques which save or generate energy as

follows:</B>

<P>

<B>i. The Department shall allocate allowances to meet claims which were

submitted to the Department by October 15 of the current year and which have

been approved by the Department pursuant to N.J.A.C. 7:27-31.8 in accordance

with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (1.50 / 2,000) x E</B>

<P>

<B>Where:</B>

<P>

<B>1.50 = The rate, expressed in pounds per MW-hr, at which allowances are

allocated for the implementation of environmentally beneficial techniques

that result in the saving or generation of electricity;</B>

<P>

<B>E = The amount of saved or generated electricity, expressed in MW-hr,

in the approved claim pursuant to N.J.A.C. 7:27-31.8; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>(AGENCY NOTE: The Department is considering two alternative methods for

providing allowances to meet Incentive Claims, and is seeking comment on

which of these two methods should be adopted. These two alternatives are

set out for (c)3ii below. If the second alternative is selected, all references

throughout the rule to an Incentive Reserve would be omitted upon adoption.

After taking into consideration the comments received on the two alternatives

during the public comment period, the Department intends to adopt one of

these two alternatives.)</B>

<P>

<B>ALTERNATIVE 1</B>

<P>

<B>ii. The allowances shall be allocated from the Incentive Reserve pursuant

to (c)3i above until all claims have been met or until the reserve is exhausted.

Thereafter, the Department shall allocate allowances from the next year's

base emission budget for New Jersey until all claims are met. If, in any

year, all claims have been met before the reserve is exhausted, then the

remaining allowances shall remain in the Incentive Reserve and shall be available

for allocation in the next year or in a subsequent year.</B>

<P>

<B>ALTERNATIVE 2</B>

<P>

<B>ii. The Department shall allocate allowances from the next year's base

emission budget for New Jersey until all claims are met.</B>

<P>

<B>(d) Prior to the control period in the year 2003 and in each year thereafter,

the Department shall transfer 4,822 allowances from the base emission budget

for New Jersey into a discretionary general account held by the Department,

leaving 8,200 of 13,022 allowances of the base budget for New Jersey to be

allocated. The Department shall allocate 8,200 allowances minus any allowances

that have been previously allocated pursuant to (c)3ii above, (e)3ii below,

(i) below or pursuant to N.J.A.C. 7:27-31.17(h). This subsection does not

apply to opt-in sources; opt-in sources are addressed separately in subsection

(f) below. The Department shall allocate allowances in accordance with the

following steps:</B>

<P>

<B>1. Step 1: This step determines the number of allowances which are to

be allocated to the New Source Reserve. The purpose of this reserve is to

hold aside a pool of allowances, so that they are available for distribution

after the control period to new budget sources which have not operated for

two full May 1 through September 30 periods. The number of allowances to

be allocated to this reserve in this step is based on each new budget source's

allowable emissions for the control period. For each new budget source, the

Department shall allocate allowances from the New Jersey emission budget

into the New Source Reserve in accordance with the following equation:</B>

<B></B>

<P ALIGN=Center>

<B>Allowances = (Allowable Emission x Rate&nbsp;Allowable Activity) / 2,000</B>

<P>

<B>Where:</B>

<P>

<B>Allowable Emission Rate = The allowable emission rate, expressed in pounds

per unit of activity. If more than one fuel is allowed to be used, the allowable

emission rate shall be the weighted average of the allowable emission rates

for each fuel type;</B>

<P>

<B>Allowable Activity = The maximum allowable activity of the source for

the control period which is based on the lesser of the maximum capacity and

any limit on the activity during the control period as established by any

law, rule or permit; and</B>

<P>

<B>2,000 = The factor converting pounds into tons;</B>

<P>

<B>2. Step 2: This step determines the number of allowances which are to

be allocated to the Growth Reserve. The purpose of this reserve is to hold

aside a pool of allowances, so that they are available for distribution after

the control period to certain budget sources to accommodate an increase in

fuel use. The number of allowances to be allocated to this reserve in this

step is based on up to a 50 percent increase in the average heat input of

budget sources having emission rates not greater than 0.15 pounds per MMBtu.

The number of allowances to be allocated to the reserve is calculated in

accordance with the following procedure for each budget source that is not

a new budget source:</B>

<P>

<B>i. Calculate the average NOx emission rate (ER<SUB>NOx</SUB>) of the source,

expressed in pounds per MMBtu, in accordance with the following equation:</B>

<B></B>

<P ALIGN=Center>

<B>ER<SUB>NOx</SUB> = (E1 + E2) / (H1 + H2)</B>

<P>

<B>Where:</B>

<P>

<B>E1 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the greatest actual heat input;</B>

<P>

<B>E2 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the second greatest actual heat input;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input; and</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input;</B>

<P>

<B>ii. If the source is an industrial boiler, the number of allowances to

be allocated to the Growth Reserve is determined in accordance with the following

procedure:</B>

<P>

<B>(1) If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (d)2i above is greater than 0.20 pounds of NOx per MMBtu,

then no allowances shall be allocated to the Growth Reserve with respect

to that source; and</B>

<P>

<B>(2) If the NOx emission rate as calculated in (d)2i above is not greater

than 0.20 pounds of NOx per MMBtu, then allowances shall be allocated to

the Growth Reserve in accordance with (d)2iv below;</B>

<P>

<B>iii. If the source is utilized for the purpose of electric or steam generation

or both and is not an industrial boiler, the number of allowances to be allocated

to the Growth Reserve is determined in accordance with the following

procedure:</B>

<P>

<B>(1) If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (d)2i above is greater than 0.15 pounds of NOx per MMBtu,

then no allowances shall be allocated to the Growth Reserve with respect

to that source;</B>

<P>

<B>(2) If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (d)2i above is not greater than 0.15 pounds of NOx per MMBtu,

then allowances shall be allocated to the Growth Reserve in accordance with

(d)2iv below;</B>

<P>

<B>iv. The number of allowances to be allocated to the Growth Reserve pursuant

to ii(2) and iii(2) above shall be calculated in accordance with the following

procedure:</B>

<P>

<B>(1) Calculate 150 percent of the average actual heat input of the two

control periods, out of the last three years, which had the highest heat

input in accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>H<SUB>150%</SUB> = 1.5 x {(H1 + H2) / 2}</B>

<P>

<B>Where:</B>

<P>

<B>H<SUB>150%</SUB> = 150 percent of the average actual heat input of the

two control periods, out of the last three years, which had the highest heat

input;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input; and</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input;</B>

<P>

<B>(2) If H<SUB>150%</SUB>, as determined in (d)2iv(1) above, is not greater

than the maximum allowable heat input of the source during the control period,

then number of allowances to be allocated to the reserve is calculated in

accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = ER<SUB>NOx</SUB> x 0.5 x {(H1 + H2) / 2} x (1 / 2,000)</B>

<P>

<B>Where:</B>

<P>

<B>ER<SUB>NOx</SUB> = The average actual NOx emission rate, expressed in

pounds per MMBtu, as calculated in (d)1i above;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons; and</B>

<P>

<B>(3) If the result of (d)2iv(1) above is greater than the maximum allowable

heat input of the source during the control period, then number of allowances

to be allocated to the reserve is calculated in accordance with the following

equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = ER<SUB>NOx</SUB> x {H<SUB>Allowable</SUB> - (H1 + H2) / 2}

x (1 / 2,000)</B>

<P>

<B>Where:</B>

<P>

<B>ER<SUB>NOx</SUB> = The average actual NOx emission rate, expressed in

pounds per MMBtu, as calculated in (d)1i above;</B>

<P>

<B>H<SUB>Allowable</SUB> = The maximum allowable heat input of the source

for the control period which is based on the lesser of the maximum heat input

capacity and any limit on the heat input during the control period as established

by any law, rule or permit;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>(AGENCY NOTE: The Department is considering two alternative methods for

providing allowances to meet Incentive Claims, and is seeking comment on

which of these two methods should be adopted. These two alternatives are

set out at (e)3ii below. If the second alternative is selected, all references

throughout the rule to an Incentive Reserve, including Step 3 proposed below,

would be omitted upon adoption. After taking into consideration the comments

received on the two alternatives during the public comment period, the Department

intends to adopt one of these two alternatives.)</B>

<P>

<B>3. Step 3: This step determines the number of allowances which are to

be allocated from the New Jersey emission budget to the Incentive Reserve.

The purpose of this reserve is to hold aside a pool of allowances so that,

after the control period, they are available for distribution to persons

who demonstrate that they have saved or generated electricity during the

control period by implementing certain environmentally beneficial techniques.

The number of allowances to be allocated from the New Jersey emission budget

into this reserve in this step is based on the operation of those budget

sources having an average actual NOx emission rate, (ERNOx) calculated in

(d)2i above, not greater than 0.15 pounds of NOx per MMBtu. The number of

allowances to be allocated from the New Jersey emission budget into this

reserve in this step is calculated in accordance with the following procedure

for each budget source that is not a new budget source:</B>

<P ALIGN=Left>

<B>i. If the source is an industrial boiler, the number of allowances to

be allocated to the Incentive Reserve is determined in accordance with the

following procedure:</B>

<P ALIGN=Left>

<B>(1) If the average NOx emission rate (ERNOx) of the source as calculated

in (d)2i above is greater than 0.20 pounds of NOx per MMBtu, then no allowances

shall be allocated to the Incentive Reserve.</B> <B>(2) If the NOx emission

rate as calculated in (d)2i above is not greater than 0.20 pounds of NOx

per MMBtu, then the preliminary number of allowances for the source is determined

in this step in accordance with the following three equations:</B>

<P ALIGN=Center>

<B>&nbsp;</B>

<P ALIGN=Center>

<IMG SRC="eqn1.gif" ALT="" HEIGHT=129 WIDTH=626>

<P ALIGN=Left>

<B>Where:</B>

<P>

<B>E<SUB>Allowable</SUB> = The average allowable emissions for the source;</B>

<P>

<B>n = The number of type of fuel burned during the two greatest heat input

control periods during the last three years;</B>

<P>

<B>AER<SUB>i</SUB> = The lesser of 0.20 pounds per MMBtu or the lowest allowable

emission rate expressed in pounds per MMBtu for the source for each type

of fuel burned during the two greatest heat input control periods;</B>

<P>

<B>H1<SUB>i</SUB> = The heat input, expressed in MMBtu, for each type of

fuel during the following control period: of the most recent three control

periods, the control period during which the source had the greatest actual

heat input;</B>

<P>

<B>H2<SUB>i</SUB> = The heat input, expressed in MMBtu, for each type of

fuel during the following control period: of the most recent three control

periods, the control period during which the source had the second greatest

actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B> <B></B>

<P ALIGN=Center>

<B>E<SUB>Actual</SUB> = (E<SUB>1</SUB> + E<SUB>2</SUB>) / 2 x (1 / 2,000)

&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Equation 2</B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>Actual</SUB> = The average allowable emissions for the source;</B>

<P>

<B>E1 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the greatest actual heat input;</B>

<P>

<B>E2 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons; and</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (E<SUB>Allowable </SUB>- E<SUB>Actual</SUB>)&nbsp;/ 2 &nbsp;

&nbsp;Equation 3</B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>Allowable</SUB> = The average allowable emissions for the source

as determined in Equation 1 above; and</B>

<P>

<B>E<SUB>Actual</SUB> = The average allowable emissions for the source as

determined in Equation 2 above;</B>

<P ALIGN=Left>

<B>ii. If the source is utilized for the purpose of electric or steam generation

or both and is not an industrial boiler, the number of allowances to be allocated

to the Incentive Reserve is determined in accordance with the following

procedure:</B>

<P ALIGN=Left>

<B>(1) If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (d)2i above is greater than 0.15 pounds of NOx per MMBtu,

then no allowances shall be allocated to the Incentive Reserve with respect

to the source; and</B> <B>(2) If the average NOx emission rate

(ER<SUB>NOx</SUB>) of the source as calculated in (d)2i above is greater

than 0.15 pounds of NOx per MMBtu, then the preliminary number of allowances

for the source is determined in this step in accordance with the following

equations:</B>

<P ALIGN=Center>

<P ALIGN=Center>

<IMG ALIGN="CENTER" SRC="eqn3.gif" ALT="" WIDTH="630" HEIGHT="114">

<P ALIGN=Center>

<P ALIGN=Left>

<B>Where:</B>

<P>

<B>E<SUB>Allowable</SUB> = The average allowable emissions for the source;</B>

<P>

<B>n = The number of type of fuel burned during the two greatest heat input

control periods during the last three years;</B>

<P>

<B>AER<SUB>i</SUB> = The lesser of 0.15 pounds per MMBtu or the lowest allowable

emission rate expressed in pounds per MMBtu for the source for each type

of fuel burned during the two greatest heat input control periods;</B>

<P>

<B>H1<SUB>i</SUB> = The heat input, expressed in MMBtu, for each type of

fuel during the following control period: of the most recent three control

periods, the control period during which the source had the greatest actual

heat input;</B>

<P>

<B>H2<SUB>i</SUB> = The heat input, expressed in MMBtu, for each type of

fuel during the following control period: of the most recent three control

periods, the control period during which the source had the second greatest

actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B> <B></B>

<P ALIGN=Center>

<B>E<SUB>Actual</SUB> = (E<SUB>1</SUB> + E<SUB>2</SUB>) / 2 x (1 / 2,000)

&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Equation 2</B>

<P>

&nbsp;<B>Where:</B>

<P>

<B>E<SUB>Actual</SUB> = The average actual emissions for the source;</B>

<P>

<B>E1 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the greatest actual heat input;</B>

<P>

<B>E2 = The total actual NOx emissions, expressed in pounds, during the following

control period: of the most recent three control periods, the control period

during which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons; and</B>

<P ALIGN=Center>

<B>Allowances = (E<SUB>Allowable </SUB>- E<SUB>Actual</SUB>)&nbsp;/ 2 &nbsp;

&nbsp;Equation 3</B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>Allowable</SUB> = The average allowable emissions for the source

as determined in Equation 1 above; and</B>

<P>

<B>E<SUB>Actual</SUB> = The average allowable emissions for the source as

determined in Equation 2 above;</B>

<P>

<B>4. Step 4: This step is a preliminary determination of the number of

allowances which are to be allocated in (d)5 (Step 5) below to each budget

source that is not a new budget source. In this step, the Department shall

preliminarily determine the number of allowances to be allocated to each

budget source that is not a new budget source, in accordance with the following

procedure:</B>

<P>

<B>i. If the source is an industrial boiler, the number of allowances to

be allocated to the source is preliminarily determined in this step in accordance

with the following procedure:</B>

<P>

<B>(1) If the average NO<SUB>x</SUB> emission rate (ER<SUB>NOx</SUB>) of

the source as calculated in (d)2i above is greater than 0.20 pounds of

NO<SUB>x</SUB> per MMBtu, then the number of allowances to be allocated to

the source is preliminarily determined in accordance with the following

equation:</B>

<P ALIGN=Center>

<B>Allowances = (0.20 / 2,000) x {(H1 + H2) / 2}</B>

<P>

<B>Where:</B>

<P>

<B>0.20 = The allocation rate, expressed in pounds per MMBtu;</B>

<P>

<B>H1 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the greatest actual heat input;</B>

<P>

<B>H2 = The heat input, expressed in MMBtu, during the following control

period: of the most recent three control periods, the control period during

which the source had the second greatest actual heat input; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>(2) If the average NO<SUB>x</SUB> emission rate as calculated in (d)2i

above is not greater than 0.20 pounds of NO<SUB>x</SUB> per MMBtu, then the

number of allowances to be allocated to the source is preliminarily determined

in accordance with the following equation:</B>

<P ALIGN=Center>

<B>Preliminary Allowances = (E<SUB>Allowable</SUB> + E<SUB>Actual</SUB>)

/&nbsp;2</B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>Allowable</SUB> = The average allowable emissions for the source,

as determined in (d)3i(2) above; and</B>

<P>

<B>E<SUB>Actual</SUB> = The average actual emissions for the source, as

determined in (d)3i(2) above;</B>

<P>

<B>ii. If the source is utilized for the purpose of electric generation alone

or for the purpose of generation of a combination electricity and useful

heat, the number of allowances to be allocated to the source is preliminarily

determined in accordance with the following procedure:</B>

<P>

<B>(1) If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in 2i above is greater than 0.15 pounds of NOx per MMBtu, then

the number of allowances for the source is preliminarily determined in accordance

with the following equation:</B>

<CENTER>

  <TABLE CELLPADDING=2 >

    <TR>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

	1.50

      </TD>

      <TD>

      </TD>

      <TD>

	x

      </TD>

      <TD>

      </TD>

      <TD>

	<U>(OE1 + OE2)</U>

      </TD>

      <TD>

      </TD>

      <TD>

	+

      </TD>

      <TD>

      </TD>

      <TD>

	0.44

      </TD>

      <TD>

      </TD>

      <TD>

	x

      </TD>

      <TD>

      </TD>

      <TD>

	<U>(OS1 + &nbsp;OS2)</U>

      </TD>

    </TR>

    <TR>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

	<CENTER>

	  2

	</CENTER>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

	<CENTER>

	  2

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	Allowances

      </TD>

      <TD>

      </TD>

      <TD>

	=

      </TD>

      <TD>

      </TD>

      <TD COLSPAN="13" VALIGN="Top">

	___________________________________________

      </TD>

    </TR>

    <TR>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD COLSPAN="13" VALIGN="Top">

	<CENTER>

	  2400

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

      <TD>

      </TD>

    </TR>

  </TABLE>

</CENTER>

<P>

<B>Where:</B>

<P>

<B>1.50 = The allocation rate, expressed in pounds per MW-hr;</B>

<P>

<B>OE1 = The net electric output, expressed in MW-hr, during the following

control period: of the most recent three control periods, the control period

during which the source had the greatest actual net electric output;</B>

<P>

<B>OE2 = The net electric output, expressed in MW-hr, during the following

control period: of the most recent three control periods, the control period

during which the source had the second greatest actual net electric output;</B>

<P>

<B>0.44 = The allocation rate, expressed in pounds per MMBtu output, which

is approximately equivalent to the allocation rate of 1.50 pounds per

MW-hr;</B>

<P>

<B>OS1 = The net useful heat output, expressed in MMBtu, during the following

control period: of the most recent three control periods, the control period

during which the source had the greatest actual net electric output;</B>

<P>

<B>OS2 = The net useful heat output, expressed in MMBtu, during the following

control period: of the most recent three control periods, the control period

during which the source had the second greatest actual net electric output;

and</B>

<P>

<B>2,000 = The factor for converting pounds into tons; and</B>

<P>

<B>(2) If the average NOx emission rate (ER<SUB>NOx</SUB>) of the source

as calculated in (d)2i above is greater than 0.15 pounds of NO<SUB>x</SUB>

per MMBtu, then the number of allowances to be allocated to the source is

preliminarily determined in accordance with the following equation:</B>

<B></B>

<P ALIGN=Center>

<B>Allowances = (E<SUB>Allowable</SUB> + E<SUB>Actual</SUB>) / 2</B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>Allowable</SUB> = The average allowable emissions for the source,

as determined in (d)4ii(2) above; and</B>

<P>

<B>E<SUB>Actual</SUB> = The average actual emissions for the source, as

determined in (d)4ii(2) above; and</B>

<P>

<B>5. Step 5: The Department shall allocate the remainder of the allowances

as follows:</B>

<P>

<B>i. The sum of the following shall be determined:</B>

<P>

<B>(1) The number of allowances allocated to the New Source Reserve in (d)1

(Step 1) above;</B>

<P>

<B>(2) The number of allowances allocated to the Growth Reserve in (d)2 (Step

2) above;</B>

<P>

<B>(3) The number of allowances allocated to the Incentive Reserve in d(3)

(Step 3) above; and</B>

<P>

<B>(4) The number of allowances that have been previously allocated pursuant

to (c)3ii above (e)3ii below, (i) below, or pursuant to N.J.A.C. 7:27-31.17(h);

and</B>

<P>

<B>(5) The number of allowances preliminarily determined in (d)4 (Step 4)

above to be allocated to each budget source that is not a new budget

source;</B>

<P>

<B>ii. If the sum in (d)5i above is less than or equal to 8,200, then the

Department shall allocate allowances as follows:</B>

<P>

<B>(1) Allowances shall be allocated to each budget source that is not a

new budget source, as preliminarily determined in (d)4 (Step 4) above; and</B>

<P>

<B>(2) Any remaining allowances that were not allocated in (d)1 (Step 1),

(d)2 (Step 2), (d)3 (Step 3), or (d)5ii(1) above shall be allocated to the

Department's discretionary account; or</B>

<P>

<B>iii. If the sum determined in (d)5i above is greater than 8,200, then

the Department shall allocate the remaining allowances to budget sources

in proportion to the amount of preliminarily determined in (d)4 (Step 4)

above. The proportional share to be allocated to each shall be determined

as follows:</B>

<P ALIGN=Center>

<B>Allowances = {(8,200 - A0 - A1 - A2 - A3) / PA<SUB>Total</SUB>} x PA</B>

<P>

<B>Where:</B>

<P>

<B>A0 = The total number of allowances that have been previously allocated

pursuant to (c)3ii above, (e)3ii below, (i) below or pursuant to N.J.A.C.

7:27-31.17(h)</B>

<P>

<B>A1 = The total number of allowances allocated to the New Source Reserve

in (d)1 (Step 1) above;</B>

<P>

<B>A2 = The total number of allowances allocated to the Growth Reserve in

(d)2 (Step 2) above;</B>

<P>

<B>A3 = The total number of allowances allocated to the Incentive Reserve

in (d)3 (Step 3) above;</B>

<P>

<B>PA = The number of allowances preliminarily determined for allocation

to the source as determined in (d)4 (Step 4) above; and</B>

<P>

<B>PA<SUB>Total</SUB> = The sum of all allowances preliminarily determined

for allocation to all budget sources in (d)4 (Step 4) above.</B>

<P>

<B>(e) After the control period of the year 2003 and of each year thereafter,

the Department shall allocate allowances from the New Source Reserve, the

Growth Reserve, and the Incentive Reserve as follows:</B>

<P>

<B>1. The Department shall allocate the allowances in the New Source Reserve

by December 15 of the current year as follows:</B>

<P>

<B>i. For any new budget source, the Department shall allocate allowances

equal to the number of tons of NOx emitted during the control period, provided

that the emissions do not exceed any applicable maximum allowable emissions

limit; and</B>

<P>

<B>ii. If there are allowances left in the New Source Reserve after distributing

the allowances in accordance with (e)1i above, then the Department shall

allocate such allowances in accordance with (e)4 below;</B>

<P>

<B>2. The Department shall allocate the allowances in the Growth Reserve

by December 15 of the current year as follows:</B>

<P>

<B>i. The only sources that are eligible to be allocated allowances from

the Growth Reserve in this subparagraph are industrial boilers that emitted

NOx at a rate less than or equal to 0.20 pounds per MMBtu heat input and

other budget sources that emitted NOx at a rate less than or equal to 0.15

pounds per MMBtu heat input. For each budget source that is not a new budget

source, the Department shall allocate allowances in accordance with the following

procedure:</B>

<P>

<B>(1) Calculate the average actual emission rate of the source for the control

period of the current year (ER<SUB>Actual</SUB>) in accordance with the following

equation:</B> <B></B>

<P ALIGN=Center>

<B>ER<SUB>Actual</SUB> = EA / HA</B>

<P>

<B>Where:</B>

<P>

<B>EA = Actual emissions during the control period, expressed in pounds of

NOx; and</B>

<P>

<B>HA = Actual heat input during the control period, expressed in MMBtu;</B>

<P>

<B>(2) If the average actual emission rate (ER<SUB>Actual</SUB>) for the

budget source as calculated in accordance with (e)2i(1) above is greater

than 0.20 pounds per MMBtu for industrial boilers or 0.15 pounds per MMBtu

for any other budget source, then the Department shall allocate no allowances

from the Growth Reserve to the budget source;</B>

<P>

<B>(3) Except as provided in (e)2iii below, if the average actual emission

rate (ER<SUB>Actual</SUB>) for the budget source as calculated in accordance

with (e)2i(1) above is not greater than 0.20 pounds per MMBtu for industrial

boilers or 0.15 pounds per MMBtu for any other budget source, and if the

actual emissions during the control period is greater than the number of

allowances allocated to the source pursuant to (d)5ii(1) or (d)5iii above,

then the Department shall allocate allowances from the Growth Reserve to

the budget source in accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = E<SUB>Actual</SUB> - A</B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>Actual</SUB> = The total NO<SUB>x</SUB> emissions, expressed in

tons, of the source during the control period, minus any emissions due to

the exceedance of an applicable maximum allowable emissions limit; and</B>

<P>

<B>A = The number of allowances allocated to the source pursuant to (d)5ii(1)

or (d)5iii above;</B>

<P>

<B>ii. If there are allowances left in the Growth Reserve after distributing

the allowances in accordance with (e)2i above, then the Department shall

allocate such allowances in accordance with (e)4 below;</B>

<P>

<B>iii. If there are not enough allowances in the Growth Reserve to allocate

allowances to all of the eligible sources accordance with (e)2i above, then

the Department shall prorate the allocations to each source according to

the amount of allowances each source would have otherwise received in accordance

with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = &nbsp;(A<SUB>Source</SUB> / A<SUB>Total</SUB>) x

A<SUB>Reserve</SUB></B>

<P>

<B>Where:</B>

<P>

<B>A<SUB>Source</SUB> = The number of allowances as determined in (e)2i above

for each source;</B>

<P>

<B>A<SUB>Total</SUB> = The total number of allowances as determined in (e)2i

above for all of the eligible sources; and</B>

<P>

<B>A<SUB>Reserve</SUB> = The number of allowances in the Growth Reserve;</B>

<P>

<B>3. The Department shall allocate allowances for the implementation of

environmentally beneficial techniques which save or generate energy as

follows:</B>

<P>

<B>i. The Department shall allocate allowances to meet claims which were

submitted to the Department by October 15 of the current year and which have

been approved by the Department pursuant to N.J.A.C. 7:27-31.8 in accordance

with the following equation:</B>

<P ALIGN=Center>

<B>Allowances = (1.50 / 2,000) x E</B>

<P>

<B>Where:</B>

<P>

<B>1.50 = The rate, expressed in pounds per MW-hr, at which allowances are

allocated for the implementation of environmentally beneficial techniques

that result in the saving or generation of electricity;</B>

<P>

<B>E = The amount of saved or generated electricity, expressed in MW-hr,

in the approved claim pursuant to N.J.A.C. 7:27-31.8; and</B>

<P>

<B>2,000 = The factor for converting pounds into tons;</B>

<P>

<B>(AGENCY NOTE: The Department is considering two alternative methods for

providing allowances to meet Incentive Claims, and is seeking comment on

which of these two methods should be adopted. These two alternatives are

set out for (e)3ii below. If the second alternative is selected, all references

throughout the rule to an Incentive Reserve would be omitted upon adoption.

After taking into consideration the comments received on the two alternatives

during the public comment period, the Department intends to adopt one of

these two alternatives.)</B>

<P>

<B>ALTERNATIVE 1</B>

<P>

<B>ii. The allowances shall be allocated from the Incentive Reserve pursuant

to (e)3i above until all claims have been met or until the reserve is exhausted.

Thereafter, the Department shall allocate allowances from the next year's

base emission budget for New Jersey until all claims are met. If, in any

year, all claims have been met before the reserve is exhausted, then the

remaining allowances shall remain in the Incentive Reserve and shall be available

for allocation in the next year or in a subsequent year.</B>

<P>

<B>ALTERNATIVE 2</B>

<P>

<B>ii. The Department shall allocate allowances from the next year's base

emission budget for New Jersey until all claims are met.</B>

<P>

<B>4. If there are any allowances remaining in the New Source Reserve or

Growth Reserve, after allowances are allocated in accordance with (e)1i and

2i above, the Department shall allocate the remaining allowances in accordance

with the following procedure:</B>

<P>

<B>i. The Department shall first compare the number of allowances that remain

in the two reserves, with the difference between the following:</B>

<P>

<B>(1) The number of allowances preliminarily determined to be allocated

in (d)4 above; and</B>

<P>

<B>(2) The number of allowances actually allocated to budget sources in (d)5

above;</B>

<P>

<B>ii. If, pursuant to (e)4i above, the number of allowances that remain

in the two reserves is less than the difference, then the Department shall

allocate all of the allowances remaining in the two reserves to each budget

source in accordance with the following equation:</B>

<P ALIGN=Center>

<B>Allowances = A<SUB>R</SUB> / PA<SUB>Total</SUB> x PA</B>

<P>

<B>Where:</B>

<P>

<B>A<SUB>R</SUB> = The total number of allowances remaining in the two

reserves;</B>

<P>

<B>PA = The number of allowances preliminarily determined for allocation

to the source in (d)4 above; and</B>

<P>

<B>PA<SUB>Total</SUB> = The total number of allowances preliminary determined

for allocation to all budget sources in (d)4 above; and</B>

<P>

<B>iii. If, pursuant to (e)4i above, the number of allowances that remain

in the two reserves is equal to or greater than the difference, then the

Department shall allocate the remaining allowances according to the following

procedure:</B>

<P>

<B>(1) The Department shall allocate allowances to each budget source in

accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = {(PA<SUB>Total</SUB> - A5) / PA<SUB>Total</SUB>} x PA</B>

<P>

<B>Where:</B>

<P>

<B>A5 = The total number of allowances allocated to budget sources in (d)5

above;</B>

<P>

<B>PA = The number of allowances preliminarily determined for allocation

to each source as determined in (d)4 above; and</B>

<P>

<B>PA<SUB>Total</SUB> = The total number of allowances preliminarily determined

for allocation to all sources in (d)4 above; and</B>

<P>

<B>(2) The Department shall transfer any allowances that still remain unallocated

to the Department's discretionary account.</B>

<P>

<B>(f) Each year, beginning in the year 1999, the Department shall allocate

a number of allowances prior to the control period into the compliance account

of each opt-in source equal to the amount of allowances added to the New

Jersey emission budget to accommodate the opt-in source pursuant to N.J.A.C.

7:27-31.4, Opt-in provisions. However, if the productivity of the source

is curtailed during the control period, then a number of allowances shall

be deducted accordingly from the source's compliance account during the

end-of-season reconciliation process and be permanently retired, pursuant

to N.J.A.C. 7:27-31.17(g)3.</B>

<P>

<B>(g) Before the control period of 1999, the Department shall allocate a

quantity of allowances to the compliance account of each source equal to

the amount of early reductions for which the Department has approved the

creation of early reduction allowances pursuant to N.J.A.C. 7:31.12, Early

Reductions.</B>

<P>

<B>(h) In the computations at (b)5ii(2), (b)5iii, (c)1ii, (c)2ii, (c)2iii,

(d)5iii, (e)2iii, (e)4ii, and (e)4iii(1), above to determine the number of

whole allowances to be allocated or distributed, individual quantities of

allowances with the highest decimals shall be rounded up and the remaining

quantities of allowances with lower decimals shall be rounded down, such

that the total amount of allowances allocated or distributed under the provision

equals the total number of allowances available.</B>

<P>

<B>(i) The Department reserves the right, in any year, prior to carrying

out the allocation process in (b) or (d) above, to allocate to another

jurisdiction a limited number of current year allowances, not to exceed two

percent of the base emission budget for the year. The Department shall exercise

this right only if implementation of the OTC MOU result has the anomalous

outcome of the other jurisdiction having insufficient allowances to meet

the needs of even its low-emitting budget sources. In the year 2003 and

thereafter, the Department shall take these allowances from its discretionary

reserve.</B>

<P>

  <HR>

<P>

<B>7:27-31.8 Claims for Incentive Reserve Allowances</B>

<P>

<B>(a) In order to provide an incentive for the saving or generation of

electricity through the implementation of certain environmentally beneficial

techniques, pursuant to N.J.A.C. 7:27-31.7(c)1, the Department shall distribute

allowances each year to persons who have demonstrated, in accordance with

the procedures of this section, that they have saved or generated electricity

through the implementation of such techniques.</B>

<P>

<B>(b) Distribution of allowances from the Incentive Reserve shall be based

on claims submitted by the persons who have saved or generated the electricity.

No allowances shall be allocated from the Incentive Reserve for any claim

that is not received by the Department by October 15 of the year in which

the electricity savings or generation occurred during the control period.</B>

<P>

<B>(c) The following persons are eligible to submit a claim for incentive

reserve allowances:</B>

<P>

<B>1. A New Jersey electric consumer who:</B>

<P>

<B>i. Purchases its electricity from a company which owns a NOx Budget source

located in New Jersey; and</B>

<P>

<B>ii. Reduces its electricity consumption at a facility located in New Jersey

through implementation of an energy efficiency measure, initiated in 1992

or thereafter, which:</B>

<P>

<B>(AGENCY NOTE: The Department is seeking comment on which of the guidance

documents proposed for (1) below should be used for quantifying electricity

consumption savings. After taking into consideration the comments received

during the public comment period, the Department intends to adopt one of

these two alternatives.)</B>

<P>

<B>ALTERNATIVE 1</B>

<P>

<B>(1) Belongs to a class to which the following quantification guidance

document applies: "Measurement Protocol for Commercial, Industrial and

Residential Facilities," issued by New Jersey's Board of Regulatory Commissioners

on April 28, 1993;</B>

<P>

<B>ALTERNATIVE 2</B>

<P>

<B>(1) Belongs to a class to which the following quantification guidance

document applies: "International Performance Measurement and Verification

Protocol for Accrediting Emission Reductions from Energy Efficiency" issued

by the United States Department of Energy in March 1996;</B>

<P>

<B>(2) Does not result in the construction, installation, or operation of

a new emission source or increase the emissions of any existing emission

source at the facility;</B>

<P>

<B>(3) Does not cause an increase in HAP emissions; and</B>

<P>

<B>(4) Does not cause an increase, which is greater than five tons per year,

in the emission of any regulated air contaminant other than NOx; and</B>

<P>

<B>2. The owner or operator of a source that is not a budget source, which

commenced operation in 1992 or thereafter and which generates electricity

through one of the following environmentally beneficial techniques:</B>

<P>

<B>i. Generation through the burning of landfill gas or digester gas;</B>

<P>

<B>ii. Generation by a fuel cell; or</B>

<P>

<B>iii. Generation using solar energy or wind power.</B>

<P>

<B>(d) A person eligible to receive an incentive allocation may, pursuant

to the Open Market Emissions Trading (OMET) Program rules at N.J.A.C. 7:27-30,

elect to receive DER credits instead. In such case, the person shall also

file a Notice of DER Credit Generation as required by the OMET Program rules,

and the Department shall request that the NATS Administrator transfer any

allowance that would otherwise have been allocated to the claimant into a

retirement account.</B>

<P>

<B>(e) Prior to filing a claim under this section, a person shall establish

a general account in the NATS pursuant to the procedures at N.J.A.C.

7:27-31.13.</B>

<P>

<B>(f) A claim for allowances from the Incentive Reserve shall include:</B>

<P>

<B>1. Documentation that the person submitting the claim is eligible to submit

a claim for allowances from the Incentive Reserve pursuant to (c) above;</B>

<P>

<B>2. Specification of the amount of electric generation or savings during

the control period that is being claimed, expressed in MW-hr as calculated

pursuant to (e) below;</B>

<P>

<B>3. The calculations made to determine the amount of electricity generation

or savings being claimed and a report of the data and the methods on which

the calculations are based;</B>

<P>

<B>4. Citation of the unique identification number assigned to a general

account held by the claimant in the NATS;</B>

<P>

<B>5. Specification as to whether the claimant wishes to receive credit for

the electric generation or savings as allowances or as DER credits. If the

claimant wishes to receive DER credits, the claimant shall include the total

number of DER credits claimed to have been generated pursuant to N.J.A.C.

7:27-30 during the control period; and</B>

<P>

<B>6. Certification in accordance with N.J.A.C. 7:27-1.39.</B>

<P>

<B>(g) The amount of electric generation or savings being claimed shall be

determined consistent with the following:</B>

<P>

<B>(AGENCY NOTE: The Department is seeking comment on which of the guidance

documents proposed in 1 below should be used for quantifying electricity

consumption savings. After taking into consideration the comments received

during the public comment period, the Department intends to elect to adopt

one of these two alternatives.)</B>

<P>

<B>ALTERNATIVE 1</B>

<P>

<B>1. For energy efficiency measures, the amount of electricity claimed to

be saved shall be calculated pursuant to the guidance document: "Measurement

Protocol for Commercial, Industrial and Residential Facilities," issued by

New Jersey's Board of Regulatory Commissioners on April 28, 1993, incorporated

by reference. This guidance document may be obtained by submitting a request

to the Department at the following address:</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Air Quality Rule Development Section</B>

<P>

<B>401 East State Street -- P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418;</B>

<P>

<B>ALTERNATIVE 2</B>

<P>

<B>1. For energy efficiency measures, the amount of electricity claimed to

be saved shall be calculated pursuant to the guidance document: "International

Performance Measurement and Verification Protocol for Accrediting Emission

Reductions from Energy Efficiency" issued by the United States Department

of Energy in March 1996, incorporated herein by reference. This guidance

document may be obtained by submitting a request to the Department at the

following address:</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Air Quality Rule Development Section</B>

<P>

<B>401 East State Street -- P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418;</B>

<P>

<B>2. For energy efficiency measures, no reduction in electricity consumption

that is a result of decreased utilization may be used as a basis for claiming

allowances from the Incentive Reserve; and</B>

<P>

<B>3. For energy generation using an environmentally beneficial technique

listed in (c)2 above, if the technique entails the supplemental use of

conventional fuels (such as oil, gas, or coal), the total amount of electricity

generated shall not include any amount of electricity generated by the use

of such fuels.</B>

<P>

<B>(h) A claim shall be submitted to the Department by October 15 of the

year in which the control period occurred on which the claim is based to

the following address:</B>

<P>

<B>ATTN: NOX BUDGET INCENTIVE ALLOWANCE CLAIM</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Office of Air Quality Management</B>

<P>

<B>401 East State Street -- P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418</B>

<P>

<B>(i) No allowances shall be allocated from the Incentive Reserve unless

the Department approves the claim. Bases for disapproval of a claim include

the following:</B>

<P>

<B>1. The claim was not received by the Department by October 15 of the year

in which the control period occurred on which the claim is based;</B>

<P>

<B>2. The claim does not include all of the items required at (d) and (f)

above;</B>

<P>

<B>3. The amount of electricity claimed to have been generated or saved was

calculated incorrectly;</B>

<P>

<B>4. The person submitting the claim is not eligible as specified at (c)

above; and</B>

<P>

<B>5. The person submitting the claim did not establish a general account

in the NATS pursuant to(e) above;</B>

<P>

  <HR>

<P>

<B>7:27-31.9 Permits</B>

<P>

<B>(a) The owner or operator of a budget source shall ensure that the operating

permit issued under N.J.A.C. 7:27-22 which applies to the budget source shall

incorporate all applicable requirements and provisions of this subchapter,

including but not limited to the following:</B>

<P>

<B>1. The requirement at N.J.A.C. 7:27-31.3(i) to have, by December 31 of

each year beginning in 1999, a number of allowances in a budget source's

compliance account which is at least equal, in emissions value, to the NOx

emissions of the source during the current year control period;</B>

<P>

<B>2. The requirement at N.J.A.C. 7:27-31.3(f) for the owner or operator

of a budget source to designate a responsible person who will be the authorized

account representative for the budget source and have the authority to submit

transfer requests to the NATS Administrator and certify and submit reports

to the NATS and the NETS that pertain to the budget source; and</B>

<P>

<B>3. The requirement at N.J.A.C. 7:27-31.14(a) and 31.16 for the owner or

operator of a budget source to monitor and report NOx emissions from the

budget source.</B>

<P>

<B>(b) Even if there are sufficient allowances in a budget source's compliance

account to account for the NOx emissions during a control period, a permittee

is not authorized to allow the emissions to occur if they would contravene

an applicable NOx emission standard established at N.J.A.C. 7:27-19, a permit

limit, or any other emission limit that applies to the budget source.</B>

<P>

<B>(c) A permittee does not need to change an operating permit, or a

preconstruction permit and certificate, to reflect the transfer of allowances

into or out of a budget source's compliance account.</B>

<P>

<B>(d) With respect to compliance with (a) above, if an application pertaining

to the budget source had previously been submitted to the Department prior

to (the operative date of this subchapter), an application for an amendment

or modification of the permit shall be submitted to the Department by (90

days after the operative date of this subchapter).</B>

<P>

<B>(e) If an opt-in source is located at a facility subject to the operating

permit requirements at N.J.A.C. 7:27-22, the owner or operator of the source

shall incorporate the opt-in approval of the source into the operating permit,

in accordance with (a) above. This shall be done through the initial application

for the operating permit, through a seven-day notice or an application for

a minor modification or a significant modification, or through an application

for a renewal, whichever applies pursuant to N.J.A.C. 7:27-22. The application

shall specify this subchapter as an applicable requirement, in accordance

with N.J.A.C. 7:27-22.6(f)6. Such incorporation shall include incorporation

of the requirement established under this subchapter for the owner or operator

to prevent emissions from the source from exceeding, in any year, the allowances

held for the source.</B>

<P>

  <HR>

<P>

<B>7:27-31.10 Allowance use, transfer and retirement</B>

<P>

<B>(a) An allowance may be used, in a given year, to meet a budget source's

NOx Budget Program compliance obligations pursuant to N.J.A.C. 7:27-31.3(i)

only if:</B>

<P>

<B>1. The allowance has been allocated or transferred to the source's compliance

account by the allowance transfer deadline for that year; and</B>

<P>

<B>2. The allowance is valid in the current year for use for compliance with

the end-of-season reconciliation requirements. The serial number assigned

to an allowance by the NATS Administrator indicates the initial year in which

the allowance may be used. The allowance may be used in the initial year

or in any year thereafter.</B>

<P>

<B>(b) An allowance may be used to meet the compliance obligations of a budget

source located in New Jersey, even though the allowance was initially allocated

in another jurisdiction, provided that the transfer of the allowance to the

budget source's compliance account is carried out in a manner consistent

with the requirements of this section.</B>

<P>

<B>(c) At any time between January 31 and December 31 during any year, an

authorized account representative may authorize the transfer of one or more

allowances from the represented account to another account. Such a transaction

is initiated by the submission of an allowance transfer request to the NATS

Administrator in accordance with (d) below. Such transfers of allowances

are voluntary actions on the part of authorized account representatives and

reflect that:</B>

<P>

<B>1. The holding of the allowance(s) has passed from one person to another

by whatever means, including but not limited to a sale, a gift, auction,

a barter arrangement, or other terms of exchange; or</B>

<P>

<B>2. The person holding the allowance(s) has elected to move the allowance(s)

from one account to another account also under the person's control.</B>

<P>

<B>(d) The following procedures shall be carried out to effect an allowance

transfer:</B>

<P>

<B>1. The transfer shall be documented on a transfer request form obtained

from the NATS Administrator;</B>

<P>

<B>2. The documentation shall include, at a minimum, the following

information:</B>

<P>

<B>i. The NATS account numbers for both the originating account and the acquiring

account;</B>

<P>

<B>ii. The name and address of the persons to which the originating account

and the acquiring account are assigned; and</B>

<P>

<B>iii. The serial number of each allowance being transferred;</B>

<P>

<B>3. The transfer request shall include a statement of certification which

must be signed by the AAR for the originating account. This statement of

certification shall be:</B>

<P>

<B>i. If the account is a compliance account: "I am authorized to make this

submission on behalf of the owners and operators of the budget source and

I hereby certify under penalty of law, that I have personally examined the

foregoing and am familiar with the information contained in this document

and all attachments, and that based on my inquiry of those individuals

immediately responsible for obtaining the information, I believe the information

is true, accurate and complete. I am aware that there are significant penalties

for submitting false information, including possible fines and imprisonment";

and</B>

<P>

<B>ii. If the account is a general account that does not pertain to a budget

source: "I am authorized to make this submission on behalf of the holder(s)

of the account and I hereby certify under penalty of law, that I have personally

examined the foregoing and am familiar with the information contained in

this document and all attachments, and that based on my inquiry of those

individuals immediately responsible for obtaining the information, I believe

the information is true, accurate and complete. I am aware that there are

significant penalties for submitting false information, including possible

fines and imprisonment";</B>

<P>

<B>4. The transfer request form shall be submitted on paper, unless the NATS

Administrator establishes procedures which allow the form to be submitted

electronically; and</B>

<P>

<B>5. The AAR for the originating account shall provide a copy of the transfer

request to each owner or operator of the budget source.</B>

<P>

<B>(e) Transfer requests shall be processed by the NATS Administrator in

order of receipt.</B>

<P>

<B>(f) The transfer request is determined to be valid when the following

has been verified by the NATS Administrator:</B>

<P>

<B>1. Each allowance listed in the transfer request is held in the originating

account at the time the transfer is to be recorded;</B>

<P>

<B>2. The person acquiring the allowances has an account in the NATS; and</B>

<P>

<B>3. The transfer request has been certified and submitted by the person

named as AAR for the originating account.</B>

<P>

<B>(g) After a transfer request is determined to be valid by the NATS

Administrator, the transfer shall be recorded in the NATS as follows: the

allowance(s) with the serial number(s) specified in the transfer request

shall be deducted from the originating account and added to the acquiring

account.</B>

<P>

<B>(h) The NATS Administrator shall provide notification of the transfer

to the AAR of the originating account, to the AAR of the acquiring account,

and to the Department.</B>

<P>

<B>(i) If the acquiring account or originating account is assigned to a person

located in a jurisdiction outside of New Jersey, the NATS Administrator shall

also provide notification of the transfer to the environmental agency serving

the other jurisdiction.</B>

<P>

<B>(j) Notification pursuant to (g) or (h) above shall, at a minimum, include

the following:</B>

<P>

<B>1. The effective date of the transfer;</B>

<P>

<B>2. The NATS account numbers for both the originating account and the acquiring

account;</B>

<P>

<B>3. The name and address of the persons to which the originating account

and the acquiring account are assigned; and</B>

<P>

<B>4. The total number of allowances transferred, and the serial number of

each allowance.</B>

<P>

<B>(k) This section allows the interstate and interjurisdictional transfer

of allowances. However, the transfer of an allowance initially allocated

by the Department pursuant to N.J.A.C. 7:27-31.7 to the compliance account

of a budget source located in another jurisdiction is prohibited, until the

other jurisdiction has also adopted rules which allow the interstate trading

of allowances and is implementing a NOx Budget Program, in a manner consistent

with the agreements in the OTC MOU.</B>

<P>

<B>(l) At any time between January 31 and December 31 during any year, a

person who holds an allowance in an account may elect to permanently retire

that allowance. In order to permanently retire one or more allowances, the

AAR of the account in which the allowance is held shall submit to the NATS

Administrator a retirement request. A retirement request shall conform to

the same procedures for a transfer request given at (c) above. The NATS

Administrator shall process the retirement request following the same procedures

as set forth for transfer requests at (d) through (i) above.</B>

<P>

  <HR>

<P>

<B>7:27-31.11 Allowance banking</B>

<P>

<B>(a) If an allowance held in a general account or a compliance account

is not used to satisfy the compliance requirement at N.J.A.C. 7:27-31.3(i),

is not otherwise deducted from the account pursuant to N.J.A.C. 7:27-31.17

or 31.19, and is not permanently retired pursuant to N.J.A.C. 7:27-31.10,

then that allowance may continue to be held in the account until the next

or subsequent control periods. This retention of one or more allowances in

an account from one year to a future year is referred to as "banking."</B>

<P>

<B>(b) Each year the NATS Administrator shall flag allowances that remain

in an account as of the allowance transfer deadline (that is, December 31)

as "banked" allowances.</B>

<P>

<B>(c) By March 1 of each year, the NATS Administrator shall:</B>

<P>

<B>1. Determine whether the total number of allowances banked in the NATS

as of January 1 of the current year exceeds 10 percent of the total regional

base emission budget for the current year control period; and</B>

<P>

<B>2. Announce that for the current year control period:</B>

<P>

<B>i. If the banked allowances are determined to be equal to or less than

10 percent of the total regional base emission budget, all banked allowances

can be used in the current year on a one-for-one basis; or</B>

<P>

<B>ii. If the banked allowances are determined to be greater than 10 percent,

the constraints on use of banked allowances as set forth in (d) below

apply.</B>

<P>

<B>(d) If the NATS Administrator determines that the total number of banked

allowances exceeds 10 percent of the regional base emission budget for the

current year control period, a portion of the banked allowances shall be

allowed to be used on a one-for-one basis, but the remainder of the banked

allowances shall be required to be used on a two-for-one basis. The NATS

Administrator shall determine which banked allowances fall in each class

in accordance with the following:</B>

<P>

<B>1. The NATS Administrator shall determine the ratio to be used to determine

which banked allowances may be used on a one-for-one basis, as follows:</B>

<B></B>

<P ALIGN=Center>

<B>Ratio = (0.1 x B<SUB>R</SUB>) / A<SUB>B</SUB></B>

<P>

<B>Where:</B>

<P>

<B>B<SUB>R</SUB>= The annual regional base NOx emissions budget; and</B>

<P>

<B>A<SUB>B</SUB> = The total number of banked allowances in all NATS accounts;

and</B>

<P>

<B>2. The NATS Administrator shall apply the ratio calculated in (d)1 above

to the number of banked allowances in each account to determine the number

of banked allowances in the account which can be used in the current year

control period on a one-for-one basis. The remaining number of banked allowances

in each account shall be used on a two-for-one basis.</B>

<P>

  <HR>

<P>

<B>7:27-31.12 Early reductions</B>

<P>

<B>(a) Pursuant to this section, the owner or operator of a budget source

may claim early reduction credit based on certain reductions in the emissions

from a budget source during 1997 and 1998. If the claim is approved, the

Department shall subsequently convert such emission reductions into

allowances.</B>

<P>

<B>(b) The owner or operator of a budget source who wishes to claim early

reductions pursuant to this section shall submit the information specified

in (c) below to the Department by October 31, 1998 to the following

address:</B>

<P>

<B>ATTN: NOX BUDGET EARLY REDUCTION CLAIM</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Office of Air Quality Management</B>

<P>

<B>P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418</B>

<P>

<B>(c) A claim shall include the following information:</B>

<P>

<B>1. Identification of the source, including the rate heat input capacity

and type of combustion unit;</B>

<P>

<B>2. Specification of the period(s) for which early reductions are being

claimed. Early reductions may be claimed for the period from May 1 through

September 30 in either the year 1997, 1998, or in both years;</B>

<P>

<B>3. The following information pertaining to the source's operation during

the period(s) specified in (c)2 above:</B>

<P>

<B>i. For each type of fuel allowed to be combusted in the source, the lowest

allowable NO<SUB>x</SUB> emission rate applicable during the period(s), expressed

in pounds per MMBtu;</B>

<P>

<B>ii. For each type of fuel allowed to be combusted in the source, the total

amount of each type combusted in the source during the period(s), expressed

in MMBtu; and</B>

<P>

<B>iii. The total heat input to the source during the period(s), expressed

in MMBtu;</B>

<P>

<B>4. The following information pertaining to the source's operation during

the period of the May 1 through September 30, during two previous years.

This information shall be submitted for the two years immediately preceding

the submission of the claim, unless the owner or operator can demonstrate

that the May 1 through September 30 periods in two other consecutive years

within the last five years are more representative of normal source operation.

In such case, the information shall be submitted for the May 1 through September

30 period in each of the five years immediately preceding the submission:</B>

<P>

<B>i. The total NO<SUB>x</SUB> emissions of the source during each May 1

through September 30 period, expressed in pounds;</B>

<P>

<B>ii. The total heat input to the source during each May 1 through September

30 period, expressed in MMBtu;</B>

<P>

<B>iii. The net electric generation of source during each period, expressed

in MW-hr;</B>

<P>

<B>iv. The net useful heat output of the source, during each period, expressed

in MMBtu.</B>

<P>

<B>5. If the source operated in 1990:</B>

<P>

<B>i. The total NO<SUB>x</SUB> emissions of source during the period of May

1 through September 30, 1990, expressed in pounds; and</B>

<P>

<B>ii. The total heat input to the source during the period of May 1 through

September 30, 1990, expressed in MMBtu;</B>

<P>

<B>6. If the early reductions are being realized as a result of repowering

or replacing a budget source which operated in 1990:</B>

<P>

<B>i. Proof that the original budget source which operated in 1990 permanently

shut down prior to September 30, 1998, and the date on which shutdown

occurred;</B>

<P>

<B>ii. Proof that a permit for construction for the repowered or replacement

source has been issued and the date on which operation of the repowered or

replacement source commenced is after October 1, 1990;</B>

<P>

<B>iii. The NOx emissions of source that has been repowered or replaced during

the period of May 1 through September 30, 1990, expressed in pounds; and</B>

<P>

<B>iv. The total heat input to the original source during the period of May

1 through September 30, 1990, expressed in MMBtu;</B>

<P>

<B>7. If the source commenced operation after 1990, but (c)6 above does not

apply:</B>

<P>

<B>i. The total heat input to the source during each May 1 through September

30 period for the most recent five years of operation; and</B>

<P>

<B>ii. The total NO<SUB>x</SUB> emissions of the source during each May 1

through September 30 period for the most recent five years of operation;</B>

<P>

<B>8. A detailed description of the method by which each piece of data specified

in (c)3 through 7 above was collected and calculated, including all assumptions

upon which the methods were based;</B>

<P>

<B>9. Estimates of the level of inaccuracy and degree of uncertainty of each

piece of data specified in (c)3 through 7 above, and an explanation of the

adjustment factor(s) applied to correct for the estimated resulting

inaccuracy;</B>

<P>

<B>10. The calculations made to determine the number of early reduction credits

claimed specified in (d), (e), and (f) below as applicable;</B>

<P>

<B>11. One of the following:</B>

<P>

<B>i. A statement that the 1997 and/or 1998 emission reductions on which

the claim for early reductions is being based have not been used and will

not be used, in whole or in part, as a basis for generating DER credits pursuant

to N.J.A.C. 7:27-30 or emission offsets pursuant to N.J.A.C. 7:27-18; or</B>

<P>

<B>ii. Proof of permanent retirement of any DER credits generated pursuant

to N.J.A.C. 7:27-30 and of any emission offsets created pursuant to N.J.A.C.

7:27-18 which are based in whole or in part, on the 1997 and/or 1998 emission

reductions which are the basis for the early reduction being claimed; and</B>

<P>

<B>12. Certification pursuant to N.J.A.C. 7:27-1.39.</B>

<P>

<B>(d) The amount of early reductions eligible to be claimed for a given

May 1 through September 30 period, by a source calculated in accordance with

the following, with adjustments made for inaccuracy and uncertainty in accordance

with (j) below:</B>

<P ALIGN=Center>

<B>Early Reductions = {(E<SUB>B</SUB>/P<SUB>B</SUB>) -

(E<SUB>P</SUB>/P<SUB>P</SUB>)} x P<SUB>P</SUB></B>

<P>

<B>Where:</B>

<P>

<B>E<SUB>B</SUB> = The total baseline NO<SUB>x</SUB> emissions of the source

as determined in accordance with (e) below, expressed in tons;</B>

<P>

<B>P<SUB>B</SUB> = The total baseline productivity of the source as determined

in accordance with (f) below;</B>

<P>

<B>E<SUB>P</SUB> = The total emissions of the source during the May 1 through

September 30 period for which early reductions are being claimed as determined

in accordance with (g) below, expressed in tons; and</B>

<P>

<B>P<SUB>P</SUB> = The total productivity of the source during the May 1

through September 30 period for which early reductions are being claimed

as determined in accordance with (h) below.</B>

<P>

<B>(e) The total baseline emissions (E<SUB>B</SUB>) for the purpose of

calculation in (d) above shall be determined in accordance with the

following:</B>

<P>

<B>1. Determine the baseline emission rate. This rate shall be the expressed

in pounds per MMBtu and shall be the lowest of the following rates:</B>

<P>

<B>i. If the source is a fossil fuel fired boiler or indirect heat exchanger

with a maximum rated heat input capacity of 250 MMBtu per hour, the greater

of 0.20 pounds NO<SUB>x</SUB> per MMBtu or 35 percent of the 1990 actual

NO<SUB>x</SUB> baseline emission rate of the source, expressed in pounds

per MMBtu;</B>

<P>

<B>ii. The source's actual 1990 NO<SUB>x</SUB> baseline emission rate, determined

by dividing the total NO<SUB>x</SUB> emissions of the source during the May

1 through September 30, 1990 period, as reported pursuant to (d)5i above,

by the total heat input to the source during the May 1 through September

30, 1990 period, as reported pursuant to (d)5ii above; or</B>

<P>

<B>iii. The lowest allowable NO<SUB>x</SUB> emission rate of the source for

the period May 1 through September 30 of the year for which early reductions

are being calculated. If more than one type of fuel was combusted during

the period, then the lowest allowable NO<SUB>x</SUB> emission rate of the

source shall be a heat input weighted average of lowest allowable

NO<SUB>x</SUB> emission rate for each fuel type; and</B>

<P>

<B>2. Determine the utilization for the source in accordance one of the following

three methods:</B>

<P>

<B>i. If the May 1 through September 30 period during the two years immediately

preceding the submission of the claim are representative of normal source

operation, the utilization shall be an average of the actual heat input to

the source during the two consecutive May 1 through September 30 periods;</B>

<P>

<B>ii. If the owner or operator can demonstrate that two other May 1 through

September 30 periods within the last five years are more representative of

normal source operation, the utilization shall be an average of the actual

heat input to the source during these other two consecutive May 1 through

September 30 periods; or</B>

<P>

<B>iii. If the owner or operator of the source can document that the source

had not operated during one of the two consecutive May 1 through September

30 periods preceding the submission of the claim, the utilization shall be

the total heat input to the source during the single previous May 1 through

September 30 periods immediately preceding the submission of the claim;</B>

<P>

<B>3. Calculate the source's average baseline emissions by multiplying the

baseline emission rate determined in 1 above by the utilization determined

in (e)2 above; and</B>

<P>

<B>4. The total baseline emissions (E<SUB>B</SUB>) to be used in (d) above

shall be the average baseline emissions calculated in (e)3 above, unless

the source was operating in 1990 and this average is greater than the source's

actual 1990 emissions during the period May 1 through September 30, 1990

as reported pursuant to (c)5i above. In such case, the total baseline emissions

(E<SUB>B</SUB>) shall be the source's actual 1990 emissions during the period

May 1 through September 30, 1990.</B>

<P>

<B>(f) The total productivity (P<SUB>B</SUB>) for the purpose of calculation

in (d) above shall be determined in accordance with the following:</B>

<P>

<B>1. Establish the applicable productivity period. If the baseline emissions

(E<SUB>B</SUB>) determined in (e) above is calculated using a value of

utilization based on:</B>

<P>

<B>i. Emissions in 1990, the applicable productivity period is May 1 through

September 30, 1990;</B>

<P>

<B>ii. Emissions in two consecutive years, the applicable productivity period

is the two May 1 through September 30 periods in those two consecutive years;

or</B>

<P>

<B>iii. Emissions during the single May 1 through September 30 period immediately

preceding the submission of the claim, the applicable productivity period

is that single period;</B>

<P>

<B>2. For sources that produce electricity, the baseline productivity is:</B>

<P>

<B>i. If the applicable period is a two consecutive years period, the average

net electric output, expressed in MW-hr, of the source during the two consecutive

periods; and</B>

<P>

<B>ii. If the applicable productivity period is a single May 1 through September

30 period in 1990 or in a most recent year, the average net electric output,

expressed in MW-hr, during the period in that single year;</B>

<P>

<B>3. For sources that produce useful energy other than electricity, the

baseline productivity is:</B>

<P>

<B>i. If the applicable period is a two consecutive years period, the average

net useful heat output, expressed in MW-hr, of the source during the two

consecutive periods; and</B>

<P>

<B>ii. If the applicable productivity period is a single May 1 through September

30 period in 1990 or in a most recent year, the average net useful heat output,

expressed in MW-hr, during the period in that single year;</B>

<P>

<B>4. For sources that produce both electricity and other useful energy,

the sum of the results of (f)2 and 3 above.</B>

<P>

<B>(g) The total productivity of the source (P<SUB>P</SUB>), during the May

1 through September 30 period for which early reductions are being claimed,

for the purposes of the calculation in (d) above, shall be determined in

accordance with the following:</B>

<P>

<B>1. For sources that produce electricity, the total net electric output,

expressed in MW-hr, during the May 1 through September 30 period for which

early reductions are being claimed;</B>

<P>

<B>2. For sources that produce useful energy other than electricity, the

total net useful heat output, expressed in MW-hr, during the May 1 through

September 30 period for which early reductions are being claimed; and</B>

<P>

<B>3. For sources that produce both electricity and other useful energy,

the sum of the results of (g)1 and 2 above.</B>

<P>

<B>(h) The source's total emissions (E<SUB>P</SUB>) during the May 1 through

September 30 period for which early reductions are being claimed, for the

purposes of the calculation in (d) above, shall be the total NO<SUB>x</SUB>

emissions as reported under (c)4i above.</B>

<P>

<B>(i) The amount of early reductions eligible to be claimed by a source

which has been repowered or by a new source which has replaced a budget source

shall be calculated in accordance with (d) above, except that:</B>

<P>

<B>1. The total baseline emissions of the source (E<SUB>B</SUB>)and the baseline

productivity of the source (P<SUB>B</SUB>) shall be based on the original

source; and</B>

<P>

<B>2. The determination of the total productivity and the source's total

emissions (E<SUB>P</SUB>) during the May 1 through September 30 period

(P<SUB>P</SUB>) shall be based on the operation of the repowered source or

the new replacement source.</B>

<P>

<B>(j) The owner or operator shall estimate the level of inaccuracy and degree

of uncertainty in the calculation of the amount of early reduction credits

being claimed, and shall apply an adjustment factor to correct for the estimated

resulting inaccuracy.</B>

<P>

<B>(k) The Department shall approve all claims for early reduction credits

upon verification that the reductions are real, properly quantified, and

surplus. If the information submitted pursuant to (c) above is reviewed and

found by the Department as true, accurate and complete, and if the early

reduction credits are calculated in accordance with the procedures in (d)

above, then the early reduction credits shall be considered real, properly

quantified, and surplus.</B>

<P>

<B>(l) The Department shall deny any claim for early reduction credits if:</B>

<P>

<B>1. The claim is not submitted in accordance with (b) above,</B>

<P>

<B>2. The claim is missing any information required in (c) above;</B>

<P>

<B>3. The claim contains any piece of information that the Department determines

is not true, accurate or complete; or</B>

<P>

<B>4. The number of credits being claimed have not been calculated properly

in accordance with (d) above.</B>

<P>

<B>(m) Notwithstanding (l)4 above, if during its review of a claim, the

Department finds that the claimant has claimed an inappropriate number of

early reduction credits due to a clear computational error, the Department

shall so inform the claimant and adjust the number early reduction credits

in lieu of denying the claim.</B>

<P>

<B>(n) On or before May 1, 1999, in order to provide the interested public

an opportunity to comment, the Department shall publish a notice in the New

Jersey Register which sets forth the number of early reduction credits the

Department intends to convert into allowances, and lists each owner or operator

who generated credits. In addition, the Department shall seek comment from

the members of the OTC who are also implementing NO<SUB>x</SUB> Budget

Programs.</B>

<P>

<B>(o) The notice published in accordance with (n) above shall provide a

comment period of at least 30 days commencing with the New Jersey Register's

date of publication. The Department shall take into consideration all comments

received during the comment period when making its final determination as

to whether to approve the claim for early reduction credit. If, at the time

of approval of a claim for early reduction credits, the amount of early reduction

allowances is more than the amount specified in the notice of intent to approve

published in the New Jersey Register, pursuant to (n) above, the Department

shall publish a second notice in which it specifies this revised amount and

sets forth the reasons for this revision.</B>

<P>

<B>(p) The Department shall provide the following information to the

Administrator of the NATS and to USEPA, Region II:</B>

<P>

<B>1. A list of all sources that have generated approved early reduction

credits;</B>

<P>

<B>2. The number of early reduction allowances approved for each source;

and</B>

<P>

<B>3. Specification of whether each owner or operator has elected to receive

the allowances or to accept an amount of DER credits, equivalent in value

to the early reduction allowances.</B>

<P>

  <HR>

<P>

<B>7:27-31.13 NO<SUB>x</SUB> Allowance Tracking System (NATS)</B>

<P>

<B>(a) The NO<SUB>x </SUB>Allowance Tracking System (NATS) is the official

electronic database serving the NO<SUB>x </SUB>Budget Program which tracks

all allowance transfer, use and retirement. The NATS shall keep track of

each allowance held in each account and shall provide information for a specific

time period such as the following:</B>

<P>

<B>1. The allowances transferred to and from each account;</B>

<P>

<B>2. The allowances retired; and</B>

<P>

<B>3. The allowances deducted for end-of season reconciliation purposes.</B>

<P>

<B>(b) Each allowance tracked in the NATS shall have a unique identification

number, assigned by the NATS Administrator. The serial number of each allowance

shall indicate the initial year the allowance may be used for compliance

with the end-of-season reconciliation requirements.</B>

<P>

<B>(c) The NATS Administrator shall establish and maintain accounts in the

NOx Allowance Tracking System (NATS), including:</B>

<P>

<B>1. On behalf of the owner or operator of each budget source, a source-specific

compliance account for each budget source;</B>

<P>

<B>2. On behalf of the Department, a general account that will serve as the

Department's "primary" account for allocation purposes, that is the account

from which all allowances allocated pursuant to N.J.A.C. 7:27-31.7(b) and

(d) shall be transferred; and</B>

<P>

<B>3. A retirement account to which allowances that have been deducted for

end-of-season reconciliation shall be transferred.</B>

<P>

<B>(d) In addition to the accounts described in (c) above, the NATS Administrator

shall establish an account in the NATS upon request of any of the following

persons, provided the request is submitted in accordance with the procedures

in (j) below:</B>

<P>

<B>1. Any person may request the establishment of one or more general accounts.

The Department, for example, shall request the establishment of several general

accounts, including the reserve accounts to be used in the allocation procedures

described at N.J.A.C. 7:27-31.7, and a "discretionary" account to hold allowances

withheld from allocation pursuant to N.J.A.C. 7:27-31.3(f); and</B>

<P>

<B>2. The Department shall request the establishment of one or more retirement

accounts. The Department, for example, shall request the establishment of

a retirement account to which allowances used for penalty purposes will be

transferred and of a retirement account to which allowances which are voluntarily

retired shall be transferred.</B>

<P>

<B>(e) At the request of the member jurisdictions of the OTC, the United

States Environmental Protection Agency's Acid Rain Division has agreed to

serve as the NATS Administrator. Requests for the establishment of an account

and any other communication directed to the NATS Administrator shall be addressed

as follows:</B>

<P>

<B>ATTN: NOX BUDGET PROGRAM</B>

<P>

<B>United States Environmental Protection Agency</B>

<P>

<B>Acid Rain Division - Mail Code 6204J</B>

<P>

<B>401 M Street SW</B>

<P>

<B>Washington, DC 20460</B>

<P>

<B>(f) A person submitting a request for the establishment of an account

shall include the following information on the applicable form obtained from

the NATS Administrator:</B>

<P>

<B>1. Specification of all persons who are holder(s) of the account;</B>

<P>

<B>2. The purpose(s) for which the account is to be used;</B>

<P>

<B>3. An "Account Certificate of Representation," completed in accordance

with (i) below;</B>

<P>

<B>4. Any other information regarding the account as requested on the form.</B>

<P>

<B>(g) The holder of an account shall designate an authorized account

representative and one alternate authorized account representative for the

account in accordance with (i) through (j) below. The authorized account

representative and the alternate authorized account representative shall

be the sole persons who have the authorities and responsibilities set forth

in (l) through (n) below.</B>

<P>

<B>(h) The designation of an authorized account representative for an account

shall be carried out in accordance with the following schedule:</B>

<P>

<B>1. For each budget source which operated any time during the period May

1 through September 30, 1990 or which has commenced operating as of the operative

date of this subchapter, the owner or operator of the source shall complete

the designation of an authorized account representative by (30 days after

the operative date of this subchapter);</B>

<P>

<B>2. For each budget source which commenced operation after the operative

date of this subchapter, the owner or operator of the source shall complete

the designation of an authorized account representative by the date for which

an application for a permit pursuant to N.J.A.C. 7:27-8 is submitted to the

Department;</B>

<P>

<B>3. For each opt-in source, the owner or operator of the source shall complete

the designation of an authorized account representative by the date for which

an application is submitted to the Department pursuant to N.J.A.C. 7:27-31.4;

and</B>

<P>

<B>4. For each account requested to be established pursuant to (d) above,

the person requesting the establishment of the account shall include the

designation of an authorized account representative with the request for

the establishment of the account.</B>

<P>

<B>(i) The following procedure shall be used for the designation of an authorized

account representative or an alternate authorized account representative:</B>

<P>

<B>1. The holder of the account shall obtain from the NATS Administrator

the form entitled "Account Certificate of Representation;"</B>

<P>

<B>2. The holder of the account shall provide the information requested on

the form. This shall include, at a minimum, the following:</B>

<P>

<B>i. If the account is a compliance account for a specific budget source,

a brief description of the budget source, the name of the facility at which

the source is located, and the state in which the budget source is located;</B>

<P>

<B>ii. If the account is a compliance account for a specific budget source,

the identification numbers for the budget source, including any number assigned

by the state and any number assigned by the facility;</B>

<P>

<B>iii. The name, mailing address, telephone and facsimile number of the

authorized account representative and of any alternate authorized account

representative;</B>

<P>

<B>iv. If the account is a compliance account for a specific budget source,

a list of the owners and operators of the budget source, or the list of the

owners and operators of the entity applying for the general account;</B>

<P>

<B>3. If the account is a compliance account, the "Account Certificate of

Representation" form shall contain the following statement: "I certify that

I,____( name)_____, was selected as the authorized account representative

as applicable by an agreement binding on the owners and operators of the

budget source legally designated as ______(name of source)___." The authorized

account representative shall sign the form and, in doing so, shall attest

to this certification;</B>

<P>

<B>4. If the account is a general account, the "Account Certificate of

Representation" form shall contain the following statement: "I certify that

I,____( name)_____, was selected as the authorized account representative

as applicable by an agreement binding on the holder(s) of the account

_____(insert one of the following, as applicable: "that will be established

pursuant to the accompanying request" or "that has the following identification

number:____(insert number)"____." The authorized account representative shall

sign the form and, in doing so, shall attest to this certification;</B>

<P>

<B>5. The authorized account representative shall submit the completed and

signed form to the NATS Administrator at the address listed on the form or

the instructions to the form. A completed and signed form constitutes the

agreement of representation. Upon receipt of the form by the NATS Administrator,

the named individual(s) are officially designated the authorized account

representative and the alternate authorized account representative; and</B>

<P>

<B>6. Once the NATS Administrator has recorded the designation of the named

individual as authorized account representative or the alternate authorized

account representative, the NATS Administrator shall confirm the designation

to the holder of the account.</B>

<P>

<B>(f) Each account in the NATS shall have a unique identification number.

Utilizing the information provided on the "Account Certificate of Representation"

form pursuant to (i) above, the NATS Administrator shall associate the following

information, at minimum, with each account: name of account owner(s) and

operator(s), name of the authorized account representative, name of the

alternative authorized account representative, mailing address of the authorized

account representative, phone number of the authorized account representative,

street address of the facility at which the budget source is located (if

applicable), and the State in which the budget source is located (if

applicable).</B>

<P>

<B>(k) A person may replace an individual who has been previously designated

as an authorized account representative or an alternate authorized account

representative with another individual. This shall be done through the submittal

of a new "Account Certificate of Representation" form pursuant to the procedures

in (g) above.</B>

<P>

<B>(l) The authorized account representative and the alternate authorized

account representative are the sole persons who may submit:</B>

<P>

<B>1. A request for a transfer of one or more allowances from the NATS account

they are authorized to represent to another account; or</B>

<P>

<B>2. A report to the NATS on behalf of an account, as required pursuant

to N.J.A.C. 7:27-31.16, Reporting.</B>

<P>

<B>(m) Even through a request or a report may be submitted by the alternate

authorized account representative pursuant to (l) above, the "primary" authorized

account representative remains responsible for all allowance transfer requests

and for all required reports.</B>

<P>

<B>(n) All correspondence from the NATS Administrator to the holder of an

account shall be directed to the primary authorized account representative

of the account.</B>

<P>

  <HR>

<P>

<B>7:27-31.14 Emissions monitoring</B>

<P>

<B>(a) The owner or operator of each budget source shall monitor the NOx

emissions from each budget source as specified by this section, by the "Guidance

for Implementation of Emission Monitoring Requirements for the NOx Budget

Program," the "Electronic Data Reporting: Acid Rain Program/NOxBudget Program

-- Version 2.0," and the "NOx Budget Program Monitoring Certification and

Reporting Instructions." These guidance documents, which were prepared for

the OTC are incorporated herein by reference, as are any subsequent revisions

thereto. Copies of these documents may be downloaded from USEPA Acid Rain

Division's world wide web page, at &lt;http://www.epa.gov/acidrain&gt;, or

may be requested by writing to the following address:</B>

<P>

<B>ATTN: NOX BUDGET PROGRAM</B>

<P>

<B>United States Environmental Protection Agency</B>

<P>

<B>Acid Rain Division - Mail Code 6204J</B>

<P>

<B>401 M Street SW</B>

<P>

<B>Washington, DC 20460</B>

<P>

<B>(b) By (the operative date of this subchapter), the owner or operator

of each budget source that commenced operation as of (the operative date

of this subchapter) shall submit to the Department a monitoring plan in

accordance with the "Guidance for Implementation of Emission Monitoring

Requirements for the NOx Budget Program" and this section. The monitoring

plan shall include, but not be limited to, a description of the monitoring

systems to be used for the source. Budget sources not subject to 40 C.F.R.

Part 75 shall include the information outlined in (h) and (i) below in the

submittal. The monitoring plan shall be submitted to the following address:</B>

<P>

<B>ATTN: NOX BUDGET MONITORING PLAN</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Bureau of Technical Services</B>

<P>

<B>380 Scotch Road -- P.O. Box 411</B>

<P>

<B>Trenton, NJ 08625-0411</B>

<P>

<B>(c) The owner or operator of each budget source that commenced operation

as of (the operative date of this subchapter) shall install and commence

operation of the emission monitoring systems set forth in the approved plan

by no later than July 1, 1998. The owner or operator of each budget source

shall ensure that the emission monitoring systems meet all the certification

testing requirements specified in the "Guidance for Implementation of Emission

Monitoring Requirements of the NOx Budget Program" by no later than April

30, 1999.</B>

<P>

<B>(d) The owner or operator of each budget source that commences operation

after (the operative date of this subchapter) shall:</B>

<P>

<B>1. Submit a monitoring plan to the address listed in (b) above in accordance

with the following schedule:</B>

<P>

<B>i. If the permit application for the source has already been submitted

to the Department as of (the operative date of this subchapter), the plan

shall be submitted as of (the operative date of this subchapter); and</B>

<P>

<B>ii. If the permit application for the source has not been submitted to

the Department as of (the operative date of this subchapter), the plan shall

be submitted at the time of permit application submittal.</B>

<P>

<B>2. Install and operate the emission monitoring systems and ensure that

they have met all of the certification testing requirements as required by

this section by no later than May 1 of the year following the date when operation

of the source commences.</B>

<P>

<B>(e) The owner or operator shall perform initial testing and periodic

calibration, accuracy testing and quality assurance/quality control testing

of all monitoring systems for each budget source as specified in the "Guidance

for Implementation of Emission Monitoring Requirements for the NOx Budget

Program."</B>

<P>

<B>(f) During a period when valid data is not being recorded by monitoring

devices approved for use to demonstrate compliance with this subchapter,

missing or invalid data shall be replaced with representative data in accordance

with the missing data provisions of 40 C.F.R. Part 75 and the "Guidance for

Implementation of Emission Monitoring Requirements for the NOx Budget

Program."</B>

<P>

<B>(g) Not withstanding (f)above, during the period from July 1, 1998 through

the earlier of the provisional certification date of the monitors and April

30, 1999, data regarding the source shall be reported, and the owner or operator

shall provide an assessment, based on sound engineering judgement, as to

whether the data meets the quality assurance tests in the "Guidance for

Implementation of Emission Monitoring Requirements for the NOx Budget Program"

and is representative of actual data based on sound engineering judgement.

During any other periods when the source is operating or if the data does

not meet existing state quality assurance requirements, invalid data shall

be replaced with representative data in accordance with the missing data

provisions of 40 C.F.R. Part 75 and the "Guidance for Implementation of Emission

Monitoring Requirements for the NOx Budget Program."</B>

<P>

<B>(h) The owner or operator of each budget source subject to 40 C.F.R. Part

75 shall demonstrate compliance with the NOx Budget Program with a certified

Part 75 monitoring system and is subject to the following requirements:</B>

<P>

<B>1. If the source has a flow monitor certified under 40 C.F.R. Part 75,

NOx emissions in pounds per hour shall be determined using the Part 75 NOx

CEMS and the flow monitor and by multiplying the results of (h)1i below with

the results of (h)1ii below:</B>

<P>

<B>i. The hourly NOx emission rate in pounds per million Btu shall be determined

by using the procedure in Section 3 of Appendix F of 40 C.F.R. Part 75; and</B>

<P>

<B>ii. The hourly heat input in million Btu per hour shall be determined

by using the procedures in Section 5 of Appendix F of 40 C.F.R. Part 75;</B>

<P>

<B>2. If the source does not have a certified flow monitor certified under

40 C.F.R. Part 75, NOx emissions in pounds per hour shall be determined by

multiplying the results of (h)2i below with the results of (h)2ii below:</B>

<P>

<B>i. The NOx emission rate in pounds per million Btu shall be determined

by using the procedure in Section 3 of Appendix F of 40 C.F.R. Part 75; and</B>

<P>

<B>ii. The hourly heat input in million Btu per hour shall be determined

by using the procedures in Appendix D of 40 C.F.R. Part 75 relating to optional

emissions data protocol for gas-fired and oil-fired units);</B>

<P>

<B>3. If the owner of operator of a source uses the procedures in 40 C.F.R.

75 Appendix E to determine NOx emission rate, NOx emissions in pounds per

hour shall be determined by multiplying the results of (h)3i below with the

results of (h)3ii below:</B>

<P>

<B>i. The NOx emission rate, expressed in pounds per MMBtu, determined by

using the procedure in Appendix E of 40 C.F.R. Part 75; and</B>

<P>

<B>ii. The hourly heat input, expressed in MMBtu per hour, determined by

using the procedures in Appendix D of 40 C.F.R. Part 75 relating to optional

emissions data protocol for gas-fired and oil-fired units);</B>

<P>

<B>4. If the owner of operator of a source uses the procedures in 40 C.F.R.

75 Subpart E to determine NOx emission rate, NOx emissions in pounds per

hour shall be determined by using the approved procedures in accordance with

Subpart E of 40 C.F.R. Part 75 and the "Guidance for Implementation of Emission

Monitoring Requirements for the NOx Budget Program;"</B>

<P>

<B>5. If the source emits to a common stack or to multiple stacks, the emissions

of the source shall be monitored in accordance to the procedures contained

in the "Guidance for Implementation of Emission Monitoring Requirements for

the NOx Budget Program."</B>

<P>

<B>(i) For a budget source which is not subject to 40 C.F.R. Part 75, the

owner or operator shall meet the monitoring requirements of the NOx Budget

Program by:</B>

<P>

<B>1. Preparing and obtaining approval of a monitoring plan as specified

in the "Guidance for Implementation of Emission Monitoring Requirements for

the NOx Budget Program." The plan shall contain, as appropriate, the

following:</B>

<P>

<B>i. A description of the monitoring approach to be used;</B>

<P>

<B>ii. A description of the major components of the monitoring system including

the manufacturer, serial number of each component, the measurement span of

component and documentation to demonstrate that the measurement span of each

component is appropriate to measure all of the expected values;</B>

<P>

<B>iii. An estimate of the accuracy of the system and documentation to

demonstrate how the estimate of accuracy was determined;</B>

<P>

<B>iv. A description of the tests that will be used for initial certification,

initial quality assurance, periodic quality assurance, and relative accuracy

meeting all the requirements contained in the "Guidance for Implementation

of Emission Monitoring Requirements for the NOx Budget Program;"</B>

<P>

<B>v. If the alternative montoring method of determining heat input involves

boiler efficiency testing, a description of the test to determine the boiler

efficiency;</B>

<P>

<B>vi. If the alternative method uses fuel sampling, a description of the

test to be used in the fuel sampling program;</B>

<P>

<B>vii. If the alternative method utilizes a default emission rate or unit

specific emission factor, as specified in (j)3 below, the monitoring plan

shall include the following:</B>

<P>

<B>(1) All information necessary to support the emission rate including

historical monitoring data and historical fuel usage data. If the source

plans to conduct emission testing to determine emission rate, the plan should

include a test protocol explaining the testing to be conducted;</B>

<P>

<B>(2) Procedures which will be utilized to demonstrate that any control

equipment operated or any procedures followed during the testing to develop

source specific emission factors or during development of load-based emissions

curves, are in use when those factors or emission curves are applied to estimate

NOx emissions; and</B>

<P>

<B>(3) Alternative uncontrolled emission rates to be used to estimate NOx

emissions during periods when control equipment is not being used or is

inoperable; and</B>

<P>

<B>viii. If the alternative method utilizes fuel flow meters to determine

heat input and such meters have not been certified pursuant to 40 C.F.R.

Part 75, the monitoring plan shall include a description of all components

of the fuel flow meter, the estimated accuracy of the fuel flow meter, the

most recent calibration of each of the components and the original accuracy

specifications from the manufacturer of the fuel flow meter;</B>

<P>

<B>2. Determining NOx emission rate using a methodology specified in (j)

below;</B>

<P>

<B>3. Determining heat input rate using the methodology described in (k)

below; and</B>

<P>

<B>4. Converting emission rate and heat input rate to NOx emissions in pounds

per hour using the procedure described in (m) below.</B>

<P>

<B>(j) Pursuant to (i)2 above, the NOx emission rate, expressed in pounds

per million Btu, shall be determined by using one of the following methods:</B>

<P>

<B>1. The owner or operator of a budget source may elect to implement monitoring

in accordance with 40 C.F.R. Part 75.</B>

<P>

<B>2. The owner or operator of a budget source that is required to install

and operate a NOx CEMS to meet the requirements of 40 C.F.R. Part 60 or to

meet other state requirements or permits, shall use that NOx CEMS to meet

the monitoring requirements of this section. Part 60 monitors utilized for

this purpose shall meet quality assurance criteria as described in the "Guidance

for Implementation of Emission Monitoring Requirements for the NOx Budget

Program." Any time a Part 60 CEMS cannot be used to report data for this

program because it does not meet the requirements of the "Guidance for

Implementation of Emission Monitoring Requirements for the NOx Budget Program,"

missing data shall be substituted using the procedures in 40 C.F.R. Part

75, Subpart D. In addition, a NOx CEMS that has not undergone initial

certification testing to meet the requirements of 40 C.F.R. Part 75 or 40

C.F.R. Part 60 shall meet the initial certification requirements contained

in the "Guidance for Implementation of Emission Monitoring Requirements for

the NOx Budget Program."</B>

<P>

<B>3. The owner or operator of a budget source that does not have a NOx CEMS

may request approval from the Department to use any of the following

methodologies to determine NOx emission rate:</B>

<P>

<B>i. For a boilers or a turbine, the procedures contained in 40 C.F.R. Part

75, Appendix E, consistent with the provisions in the "Guidance for

Implementation of Emission Monitoring Requirements for the NOx Budget

Program;"</B>

<P>

<B>ii. For a combustion turbine, a default emission factor as follows:</B>

<P>

<B>(1) For a gas-fired turbine, the default emission factor shall be 0.7

pounds NOx per MMBtu;</B>

<P>

<B>(2) For an oil-fired turbine, the default factor shall be 1.2 pounds NOx

per MMBtu; or</B>

<P>

<B>(3) For an oil-fired or a gas-fired turbine, a default factor equal to

the maximum potential NOx emission rate of the specific source determined

through testing conducted in accordance with a protocol approved by the

Department; or</B>

<P>

<B>iii. For a boiler, a default emission factor as follows:</B>

<P>

<B>(1) 2.0 pounds per MMBtu; or</B>

<P>

<B>(2) A default factor equal to the maximum potential NOx emission rate

of the specific source determined through testing conducted in accordance

with a protocol approved by the Department.</B>

<P>

<B>(k) The owner or operator of a budget source that does not have a flue

gas flow monitor may request approval from the Department to use any of the

following methodologies to determine the hourly heat input rate:</B>

<P>

<B>1. Use a flow monitor and a diluent monitor meeting the requirements of

40 C.F.R. Part 75 and the procedures in Section 5 of Appendix F of 40 C.F.R.

Part 75;</B>

<P>

<B>2. For a source that combusts only oil or natural gas, use a fuel flow

monitor meeting the requirements of Appendix D of 40 C.F.R. Part 75 and the

procedures of Section 5 of Appendix F of 40 C.F.R. Part 75;</B>

<P>

<B>3. For a source having a rated capacity of less than 25 MW that combusts

only oil or natural gas, measure the fuel used on a frequency of no less

than weekly and calculate the heat input rate on an hourly basis by apportioning

the fuel based on electrical load in accordance with the following formula:</B>

<B></B>

<P ALIGN=Center>

<B>Hourly Heat Input = (Hourly Electrical Load x Total heat Input) / Total

Electrical Load</B>

<P>

<B>4. A budget source that combusts any fuel other than oil or natural gas,

one of the following alternative methods:</B>

<P>

<B>i. Conducting fuel sampling and analysis and monitoring fuel usage;</B>

<P>

<B>ii. Using boiler efficiency curves and other monitored information such

as boiler steam output; or</B>

<P>

<B>iii. Any other methods approved by the Department and which meet the

requirements contained in the "Guidance for Implementation of Emission Monitoring

Requirements for the NOx Budget Program."</B>

<P>

<B>(l) The alternative methods for determining heat input in (k) above are

subject to both initial and periodic relative accuracy, and quality assurance

testing as prescribed by the "Guidance for Implementation of Emission Monitoring

Requirements for the NOx Budget Program." If the Department determines that

the accuracy or reliability a method is not comparable to other approved

methods, the Department may require that the use of the method be disallowed

or discontinued or the Department may require the use of corrective factors

to be included in the method. The Department shall not approve an alternative

method for determining NOx emission rate requested pursuant to (j)3 above

if the source has a NOx CEMS.</B>

<P>

<B>(m) The hourly NOx emission rate in pounds per million Btu as determined

in accordance with (j) above, and hourly heat input rate in MMBtu per hour

as determined in accordance with (i) above, shall be multiplied to result

in NOx emissions in pounds per hour and reported to the NETS in accordance

with N.J.A.C. 7:27-31.16, Reporting requirements.</B>

<P>

  <HR>

<P>

<B>7:27-31.15 Recordkeeping</B>

<P>

<B>The owner or operator of any budget source shall maintain for each budget

source and for five years, a file of all measurements, data, calculations,

and reports and other information required by this subchapter.</B>

<P>

  <HR>

<P>

<B>7:27-31.16 Reporting</B>

<P>

<B>(a) In order to allocate allowances pursuant to N.J.A.C. 7:27-31.7, Annual

allowance allocation, the Department shall need to rely on information reported

by the owners or operators of budget sources regarding the operation of the

sources during May 1 through September 30 of the years 1996, 1997, and 1998.

Therefore, the owner or operator of a budget source shall submit the following

information, relating to the operation of the source during the May 1 through

September 30 of the years 1996, 1997, and 1998 as follows:</B>

<P>

<B>1. By (60 days after the operative date of this subchapter), the owner

or operator of a budget source shall submit the information specified in

(a)3 below for May 1 through September 30, 1996 and for May 1 through September

30, 1997, to the Department at the address listed in (b) below;</B>

<P>

<B>2. By October 30, 1998, the owner or operator of a budget source shall

submit the information specified in (a)3 below for May 1 through September

30, 1998, to the Department at the address listed in (b) below; and</B>

<P>

<B>3. The following information is required for each of the three years to

be submitted for each source for each type of fuel burned on forms available

from the Department at the address listed in (b) below:</B>

<P>

<B>i. Information identifying the budget source and type of combustion

unit;</B>

<P>

<B>ii. The rated fuel capacity of the source (expressed in MMBtu per hour);</B>

<P>

<B>iii. Whether a restriction on heat input or hours of operation exists,

and if so, specify how much fuel or how many hours and specify the period

of time for which the restriction applies;</B>

<P>

<B>iv. For the May 1 through September 30 period:</B>

<P>

<B>(1) For each type of fuel burned, the heat input, expressed in MMBtu;

and</B>

<P>

<B>(2) For each type of fuel burned, the total actual NOx emissions, expressed

in pounds;</B>

<P>

<B>v. For each type of fuel burned, the most stringent applicable allowable

NOx emission rate, expressed in pounds per MMBtu;</B>

<P>

<B>vi. Any other information requested by the Department for allocating

allowances pursuant to N.J.A.C. 7:27-31.7, Annual allowance allocation; and</B>

<P>

<B>vii. Certification pursuant to N.J.A.C. 7:27-1.39.</B>

<P>

<B>(b) Information submitted to the Department in accordance with (a) above

shall be mailed to the following address:</B>

<P>

<B>ATTN: NOX BUDGET PROGRAM</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Office of Air Quality Management</B>

<P>

<B>401 East State Street -- P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418</B>

<P>

<B>(c) Within 30 days after the end of the third calendar quarter of 1998,

and within 30 days of the end of each quarter thereafter for data monitored

using CEMS, and within 30 days of the end of each second and third calendar

quarter thereafter for data measured or estimated using non-CEMS based

methodologies, the authorized account representative for each budget source

shall submit, in electronic format which meets the requirements of the USEPA's

Electronic Data Reporting (EDR) convention, all information specified in;</B>

<P>

<B>1. The "Guidance for Implementation of Emission Monitoring Requirements

for the NOx Budget Program" relating to emissions reporting, which includes

but is not limited to: NOx emission in pounds per hour for every hour during

the control period and the total NOx emission data for the quarter and the

control period in pounds; and</B>

<P>

<B>2. The "Electronic Data Reporting: Acid Rain Program/NOxBudget Program

-- Version 2.0" and the "NOx Budget Program Monitoring Certification and

Reporting Instructions," are incorporated herein by reference, as are any

subsequent revisions thereto. These documents, which were prepared for the

OTC were initially issued on July 3, 1997. Copies of these documents may

be downloaded from USEPA Acid Rain Division's world wide web page, at

&lt;http://www.epa.gov/acidrain&gt;, or may be requested by writing to the

following address:</B>

<P>

<B>ATTN: NOX BUDGET PROGRAM</B>

<P>

<B>United States Environmental Protection Agency</B>

<P>

<B>Acid Rain Division - Mail Code 6204J</B>

<P>

<B>401 M Street SW</B>

<P>

<B>Washington, DC 20460</B>

<P>

<B>(d) In order for the Department to obtain data necessary for the allocation

of allowances pursuant to N.J.A.C. 7:27-31.7, in the quarterly EDR submissions

to the NETS, the AAR for a budget source shall submit the following information

for each budget source for each hour during the quarter, regardless as to

whether the "Guidance for Implementation of Emission Monitoring Requirements

for the NOx Budget Program" specifies the reporting of the information:</B>

<P>

<B>1. The hourly heat input to the source, expressed in MMBtu;</B>

<P>

<B>2. The hourly gross electric output of the source, expressed in MW-hr;</B>

<P>

<B>3. The hourly gross useful heat output of the source, expressed in

MMBtu;</B>

<P>

<B>4. The hourly net electric output of the source, expressed in MW-hr; and</B>

<P>

<B>5. The hourly net useful heat output of the source, expressed in MMBtu;</B>

<P>

<B>(e) After a budget source is permanently shutdown, the AAR for the source

may obtain from the Department an exemption from the requirements pertaining

to that source at N.J.A.C. 7:27-31.14, Emissions monitoring, N.J.A.C. 7:27-31.15,

Recordkeeping, and N.J.A.C. 7:27-31.16, Reporting, in accordance with the

following procedures:</B>

<P>

<B>1. To obtain an exemption, the AAR shall submit a written request to the

Department for exemption at the address:</B>

<P>

<B>ATTN: NOX BUDGET SHUTDOWN</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Office of Air Quality Management</B>

<P>

<B>401 East State Street -- P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418</B>

<P>

<B>2. A request for an exemption shall include identification of the budget

source and the date of shutdown of the budget source;</B>

<P>

<B>3. Upon verification that the source has been permanently shut down, the

Department shall approve the request and shall send written approval of exemption

from the requirements of N.J.A.C. 7:27-31.14, Emissions monitoring, N.J.A.C.

7:27-31.15, Recordkeeping, and N.J.A.C. 7:27-31.16, Reporting, pertaining

to the source to the authorized account representative and the NETS

Administrator. Such approval may contain conditions as deemed necessary by

the Department; and</B>

<P>

<B>4. If the Department verifies that the source has not been permanently

shut down, the Department shall deny the request and shall send written

notification of such denial to the AAR of the source.</B>

<P>

<B>(f) The AAR of an account from which allowances were transferred pursuant

to N.J.A.C. 7:27-31.10, Allowance use, transfer, and retirement, shall make

available to the Department upon request information regarding the transaction

cost of the transfer and the price received per allowance transferred.</B>

<P>

  <HR>

<P>

<B>7:27-31.17 End-of-season reconciliation</B>

<P>

<B>(a) After each control period, in accordance with the procedures in this

section, the NETS Administrator shall conduct the end-of-season reconciliation,

during which allowances, equal in emissions value to the source's emissions

during the control period, are deducted from each budget source's compliance

account.</B>

<P>

<B>(b) No allowance may be used during the reconciliation process to satisfy

current year compliance obligations if the allowance is identified with a

serial number indicating that the first year it may be used is a future

year.</B>

<P>

<B>(c) For each budget source, the basis for a determination of compliance

in the reconciliation process shall be the following:</B>

<P>

<B>1. Monitored emissions data as reported by the budget source to the NETS

Administrator, as reported to the NETS Administrator pursuant to N.J.A.C.

7:27-31.16 above, and as adjusted by the Administrator to be in accordance

with N.J.A.C. 7:27-31.14, Emissions monitoring; and</B>

<P>

<B>2. The balance in the compliance account of the budget source. This balance

shall be the total number of allowances in the account as of the allowance

transfer deadline after all applicable allowance allocations have been made

and after all transfers have been recorded in the NATS.</B>

<P>

<B>(d) No allowance that is in a general account, in a retirement account,

or in a compliance account for another source shall be used to determine

a budget source's compliance with the requirements of N.J.A.C. 7:27-31.3(i)

during the end-of-season reconciliation process.</B>

<P>

<B>(e) Each year during the period November 1 through December 31, inclusive,

the authorized account representative may request the NATS Administrator

to deduct allowances from the compliance account during the reconciliation

process for that year's control period in a specific order. This request

shall be submitted by the AAR to the NATS Administrator by no sooner than

November 1 and no later than the allowance transfer deadline (December 31).

In the request, the AAR shall identify the account number of the compliance

account from which the deductions shall be made and the serial numbers of

the allowances to be deducted in order of deduction.</B>

<P>

<B>(f) If an AAR fails to submit a request pursuant to (e) above for the

compliance account of a budget source, the NATS Administrator shall first

deduct allowances with serial numbers indicating the current year in the

order in which they were deposited into the account, then shall deduct banked

allowances in the order in which they were deposited into the account.</B>

<P>

<B>(g) The NATS Administrator shall reconcile allowances with the NOx emissions

from each budget source as follows:</B>

<P>

<B>1. If the NATS Administrator had announced that all banked allowances

may be used on a one-for-one basis pursuant to N.J.A.C. 7:27-31.11(c)2i,

then one allowance shall be deducted from each budget source's compliance

account for each ton of NOx emitted from the source during the control

period;</B>

<P>

<B>2. If the NATS Administrator had announced that a certain proportion of

banked allowances may be used on a one-for-one basis pursuant to N.J.A.C.

7:27-31.11(c)2ii:</B>

<P>

<B>i. First, one current year allowance shall be deducted from each budget

source's compliance account for each ton of NOx emitted from the source during

the control period until all NOx emissions are accounted for or until no

current year allowances remain in the compliance account whichever occurs

first;</B>

<P>

<B>ii. Second, one banked allowance shall be deducted from each budget source's

compliance account for each remaining ton of NOx emitted from the source

during the control period until all NOx emissions are accounted for or until

the number of banked allowances that are permitted to be used on a one-for-one

basis are exhausted from the compliance account whichever occurs first; and</B>

<P>

<B>ii Third, two banked allowances shall be deducted from each budget source's

compliance account for each remaining ton of NOx emitted from the source

during the control period.</B>

<P>

<B>(AGENCY NOTE: Two alternatives are set forth below for paragraph (g)3.

The Department will adopt one of these two alternatives. The Department requests

comment as to which of these two alternatives is preferable.)</B>

<P>

<B>ALTERNATIVE 1 (HEAT INPUT)</B>

<P>

<B>3. In addition to (g)1 or 2 above, for each opt-in source, if the actual

heat input for the control period is less than the heat input used to determine

the number of allowances created for the source pursuant to N.J.A.C. 7:27-31.4,

then a number of allowances shall be deducted from the compliance account

as determined in accordance with the following equation:</B> <B></B>

<P ALIGN=Center>

<B>Allowances = (E&nbsp;/ HI) x (HI<SUB>B</SUB> - HI) x (1 / 2,000)</B>

<P>

<B>Where:</B>

<P>

<B>E = The total NOx emission of the source during the control period, expressed

in pounds</B>

<P>

<B>HI = The total heat input to the source, expressed in MMBtu</B>

<P>

<B>HI<SUB>B</SUB> = The average heat input used to calculate the number of

allowances as determined at N.J.A.C. 7:27-31.4(i)1 or (j)1, expressed in

MMBtu</B>

<P>

<B>2,000 = The factor converting pounds into tons</B>

<P>

<B>ALTERNATIVE 2 (ENERGY OUTPUT)</B>

<P>

<B>3. In addition to (g)1 or 2 above, for each opt-in source, if the energy

output for the control period is less than the energy output during the period(s)

used to determine the number of allowances created for the source pursuant

to N.J.A.C. 7:27-31.4, then a number of allowances shall be deducted from

the compliance account as determined in accordance with the following

equation:</B>

<P ALIGN=Center>

<B>Allowances = (E / O) x (O<SUB>B</SUB> - O) x (1 / 2,000)</B>

<P>

<B>Where:</B>

<P>

<B>E = The total NOx emission of the source during the control period, expressed

in pounds;</B>

<P>

<B>O = The total net energy output of the source, expressed in MW-hr;</B>

<P>

<B>O<SUB>B</SUB> = The net energy output during the period used to calculate

the number of allowances as determined at N.J.A.C. 7:27-31.4(i)1 or (j)1,

expressed in MW-hr; and</B>

<P>

<B>2,000 = The factor converting pounds into tons.</B>

<P>

<B>(h) The Department shall notify the holder of an account if it is determined

that during the current year or in any preceding year, too many or too few

allowances were allocated to an account, due to an error or due to reliance

on data that has been subsequently shown to be inaccurate. For any such

discrepancy, provided that the holder of the account has been notified by

December 1, the NATS Administrator shall deduct or add allowances to the

account during the reconciliation process in order to eliminate the discrepancy.

If allowances are to be deducted, the holder of the account is responsible

for having sufficient allowances in the account by the allowance transfer

deadline to cover the deduction. If allowances are to be added, and there

are no current year allowances or allowances in an applicable reserve account

available, the allowances the NATS Administrator adds shall be taken from

the next year's base emission budget.</B>

<P>

<B>(i) If during the reconciliation process, there are not enough allowances

in a source's compliance account to satisfy the provisions of (g) and (h)

above, the owner or operator of the budget source is subject to N.J.A.C.

7:27-31.19, Excess Emissions Deduction, and to penalties as set forth at

N.J.A.C. 7:27A-3, Air Administrative Procedures and Penalties.</B>

<P>

  <HR>

<P>

<B>7:27-31.18 Compliance certification</B>

<P>

<B>(a) For each control period, the authorized account representative for

the budget source shall submit to the Department an annual compliance

certification.</B>

<P>

<B>(b) The compliance certification shall be submitted no later than the

allowance transfer deadline (December 31) of each year to the following

address:</B>

<P>

<B>ATTN: NOX BUDGET COMPLIANCE CERTIFICATION</B>

<P>

<B>New Jersey Department of Environmental Protection</B>

<P>

<B>Office of Air Quality Management</B>

<P>

<B>401 East State Street -- P.O. Box 418</B>

<P>

<B>Trenton, NJ 08625-0418</B>

<P>

<B>(c) The compliance certification shall contain, at a minimum:</B>

<P>

<B>1. Identification of the budget source, including name, address, name

of authorized account representative and NATS account number;</B>

<P>

<B>2. A statement indicating whether emissions data has been submitted to

the NETS in accordance with the procedures established in N.J.A.C. 7:27-31.16,

Reporting, and in conformance with the requirements of the NETS

Administrator;</B>

<P>

<B>3. A statement indicating whether sufficient allowances are held in the

budget source's compliance account as of the allowance transfer deadline

to properly account for the budget source's NOx emissions during the control

period;</B>

<P>

<B>4. A statement indicating whether the monitoring plan which governs the

budget source was maintained to reflect actual operation of the budget

source;</B>

<P>

<B>5. A statement verifying that all emissions from the budget source were

accounted for, either through the applicable monitoring or through application

of the appropriate missing data procedures;</B>

<P>

<B>6. A statement indicating whether there were any changes in the method

of operation of the budget source or the method of monitoring the budget

source during the current year; and</B>

<P>

<B>7. Certification pursuant to N.J.A.C. 7:27-1.39.</B>

<P>

<B>(d) The Department reserves the right to verify compliance by whatever

means necessary, including but not limited to:</B>

<P>

<B>1. Inspection of facility operating records;</B>

<P>

<B>2. Obtaining information on allowance deduction and transfers from the

NATS;</B>

<P>

<B>3. Obtaining information on emissions from the NETS;</B>

<P>

<B>4. Testing emission monitoring devices; and</B>

<P>

<B>5. Requiring the budget source to conduct emissions testing under the

supervision of the Department.</B>

<P>

  <HR>

<P>

<B>7:27-31.19 Excess emissions deduction</B>

<P>

<B>(a) If through the reconciliation process pursuant to N.J.A.C. 7:27-31.16,

the NATS Administrator determines that there are not enough allowances in

a budget source's compliance account to properly account for the emissions

of that source during the control period, the NATS Administrator shall

automatically deduct three allowances for each ton of NOx emitted for which

no allowances were held as of the allowance transfer deadline.</B>

<P>

<B>(b) A deduction, made pursuant to (a) above, shall occur when allowances

are next allocated pursuant to N.J.A.C. 7:27-31.7 or when allowances are

next transferred into the account pursuant to N.J.A.C. 7:27-31.10.</B>

<P>

  <HR>

<P>

<B>7:27-31.20 Program audit</B>

<P>

<B>(a) The Department shall conduct an audit of the NOx Budget Program in

2002 and every three years thereafter to ensure that the program is providing

expected performance in regards to emissions monitoring and allowance use.

Such audits shall include, as appropriate, confirmation of emissions reporting

accuracy through validation of CEMS and data acquisition systems at the budget

source, and review of allowance transfer and use by budget sources

(geographically and temporally). Each periodic audit shall examine the extent

to which use of banked allowances has, or has not, contributed to emissions

in excess of the budget for each year preceding the audit. The periodic audit

shall further provide an assessments to whether the effect of the program

is consistent with the requirements for demonstration of reasonable further

progress toward or the attainment and maintenance of the National Ambient

Air Quality Standard for ozone.</B>

<P>

<B>(b) As an alternative, in whole or in part, to the Department's conduct

of an audit pursuant to (a) above, the Department reserves the right to request

a third party audit of the program. Such third party audit could be implemented

on a state by state basis or could be performed on a region-wide basis under

the supervision of the Ozone Transport Commission.</B>

<P>

<B>(c) If an audit results in one or more recommendations for revision of

New Jersey's NOx Budget Program, the Department shall consider the audit

recommendations, in consultation with the other participating jurisdictions

in the OTR. If the Department determines that it is necessary or appropriate,

the Department shall propose or recommend to the NATS and NETS Administrator

the appropriate changes to current procedures.</B>

<P>

  <HR>

<P>

<FONT SIZE=+1>7:27A-3.10 Civil administrative penalties for violation of

rules adopted pursuant to the Act</FONT>

<P>

(a) - (l) (No change.)

<P>

(m) The violations of N.J.A.C. 7:27 and the civil administrative penalty

amounts for each violation are as set forth in the following Civil Administrative

Penalty Schedule. The numbers of the following subsections correspond to

the numbers of the corresponding subchapter in N.J.A.C. 7:27. The rule summaries

for he requirements set forth in the Civil Administrative Penalty Schedule

in this subsection are provided for informational purposes only and have

on legal effect.

<P>

CIVIL ADMINISTRATIVE PENALTY SCHEDULE

<P>

1. - 30. (No change.)

<P>

<B>31. The violations of N.J.A.C. 7:27-31, and the civil administrative penalty

amounts for each violation, are as set forth in the following table:</B>

<CENTER>

  <TABLE BORDER=8 CELLPADDING=2 >

    <TR>

      <TD>

	<CENTER>

	  Citation

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  Rule Summary

	</CENTER>

      </TD>

      <TD>

	First Offense

      </TD>

      <TD>

	Second Offense

      </TD>

      <TD>

	Third Offense

      </TD>

      <TD>

	Fourth and Each Subsequent Offense

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.3(i)

      </TD>

      <TD>

	Hold Allowances<SUP>7</SUP>

      </TD>

      <TD>

	<CENTER>

	  $2,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $4,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $10,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $30,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.13(i)

      </TD>

      <TD>

	Designate AAR

      </TD>

      <TD>

	<CENTER>

	  $500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $7,500

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.14(b)

      </TD>

      <TD>

	Submit Monitoring Plan

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $5,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $15,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.14(c)

      </TD>

      <TD>

	Install/Operate Monitoring System

      </TD>

      <TD>

	<CENTER>

	  $10,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $20,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $50,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $50,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.14(c)

      </TD>

      <TD>

	Certify Monitoring System

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $5,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $15,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.14(d)

      </TD>

      <TD>

	Install/Operate Monitoring System

      </TD>

      <TD>

	<CENTER>

	  $10,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $20,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $50,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $50,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.14(d)

      </TD>

      <TD>

	Certify Monitoring System

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $5,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $15,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.14(g)

      </TD>

      <TD>

	Demonstrate Compliance

      </TD>

      <TD>

	<CENTER>

	  $2,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $4,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $10,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $30,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.14(h)

      </TD>

      <TD>

	Monitoring

      </TD>

      <TD>

	<CENTER>

	  $2,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $4,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $10,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $30,000

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.15

      </TD>

      <TD>

	Records

      </TD>

      <TD>

	<CENTER>

	  $500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $7,500

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.16(a)

      </TD>

      <TD>

	Submit Information

      </TD>

      <TD>

	<CENTER>

	  $300

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $600

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $1,500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $4,500

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.16(c)

      </TD>

      <TD>

	Emissions Reporting

      </TD>

      <TD>

	<CENTER>

	  $500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $7,500

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.16(f)

      </TD>

      <TD>

	Make Information Available

      </TD>

      <TD>

	<CENTER>

	  $500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,500

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $7,500

	</CENTER>

      </TD>

    </TR>

    <TR>

      <TD>

	N.J.A.C. 7:27-31.18(a) or (b)

      </TD>

      <TD>

	Submit Compliance Certification

      </TD>

      <TD>

	<CENTER>

	  $1,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $2,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $5,000

	</CENTER>

      </TD>

      <TD>

	<CENTER>

	  $15,000

	</CENTER>

      </TD>

    </TR>

  </TABLE>

</CENTER>

<P>

<B><SUP>7</SUP>For purposes of determining the number of days of violation,

if any NO<SUB>x</SUB> emissions of a budget source for the control period

in excess of the proper number of allowances authorizing such emissions as

held in the source's compliance account at the allowance transfer deadline,

then the Department shall presume that each day in the control period, which

is 153 days long, constitutes a day in violation unless the owner of operator

of the budget source demonstrates, to the satisfaction of the Department,

that a lesser number of days shall be considered; and each ton of excess

emissions is a separate violation.</B>

<P>

(n) - (p) (No change.)

<P>

Based upon consultation with staff, I, Robert C. Shinn, Jr., Commissioner

of the Department of Environmental Protection, hereby certify that this document

permits the public to accurately and plainly understand the purposes and

expected consequences of these proposed new rules.

<P>

August 18, 1997 /s/ ROBERT C. SHINN, JR.

<P>

DATE Robert C. Shinn, Jr., Commissioner

<P>

<A NAME="List"></A><A HREF="noxbudrf.htm">Supplementary Documents</A>

<P>

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